IRS Updates Letter Ruling Procedures for DB Plan Spin-Offs and Terminations

The IRS has issued Revenue Procedure (Rev. Proc.) 2022-28, which updates Rev. Proc. 2022-3, on whether the IRS will issue letter rulings or determination letters. The IRS will no longer issue letter rulings on whether an employer reversion of cash and the fair market value of other property received from a qualified plan occurs in connection with a spin-off/termination transaction that involved excess assets. For this Revenue Procedure, a “spin-off/termination transaction that involves excess assets” is defined as a transaction in which:

  • Less than 100% of the assets of a defined benefit plan are spun off to another defined benefit plan sponsored or maintained by the same employer,
  • The defined benefit plan receiving the assets that have been spun off is terminated within a short period of time after receiving those assets, and
  • Assets remain in the trust of the terminated defined benefit plan after all benefits are distributed to or on behalf of all participants and beneficiaries.

The update applies to all requests received by or pending with the IRS as of June 21, 2022.