permit the sponsorship of such plans by a wider segment of entities. Furthermore, we have also developed a simpler application form for adopters of master and prototype plans, and dropped the requirement that they be filed in duplicate. Five, as another benefit stemming from the master and prototype programs, the Service has made available a number of these plans which have been approved as to form and which can be used as samples by those drafting other plans. The Service has also issued standard paragraphs which, in most cases, can be incorporated into employers' plans. Six, to further reduce the cost of adopting new plans or amending existing plans to conform to ERISA, the Service has developed a number of other plan design and drafting aids. Those include model profit sharing and model money purchase plans for employers who do not already have plans, and restated model profit sharing and model money purchase plans which are designed to change existing plans to comply with the code as amended by ERISA. These model plans, if adopted in their entirety and without modification, will qualify without a determination letter being issued. Small businesses that find these model plans suitable for their purposes can expect significant time and cost savings. Seven, the Service has developed alert guidelines which are, essentially, checksheets for determining compliance with the ERISA requirements. While these checksheets were designed for internal use by Service personnel, these guidelines are available to the public and their use by employers to test their applications prior to submission speeds the determination letter process. As announced in Information Release 1833, dated June 10, 1977, the Service has developed a checksheet and sample plan language for master and prototype plans and gives priority consideration to applications for plans based on such drafting aids. Finally, Mr. Chairman, your letter also expressed an interest in our efforts to simplify disclosure requirements. Section 3001(a) of ERISA requires that before the IRS may issue an advance determination letter regarding the qualification of a plan, the applicant must give notice of the application to each employee who qualifies as an interested party. In an effort to aid employers in complying with this statutory requirement, we published Revenue Procedure 75-31, which sets forth the procedures employers must follow to satisfy this requirement, which also includes a sample "Notice to Interested Parties". We recognize now, however, that these procedures are unnecessarily complex. Accordingly, we are currently revising the revenue procedure and particularly the sample notice to make compliance easier and the language of the notice less technical and more informative. In conclusion, let me say that the Service will continue to search for ways to help employers continue their plans and provide maximum benefits for their employees in the most simple and economic ways possible consistent with the requirements and safeguards of the controlling statutory provisions. That concludes my statement, and my associates and I would now be happy to try to answer any questions you might have. [The prepared statement of Mr. Winborne follows:] STATEMENT OF S. A. WINBORNE, ACTING ASSISTANT COMMISSIONER, EMPLOYEE PLANS AND EXEMPT ORGANIZATIONS, Internal REVENUE SERVICE MR. CHAIRMAN, I WOULD LIKE TO INTRODUCE MYSELF AND THE MEMBERS OF MY STAFF WHO HAVE ACCOMPANIED ME TODAY. I'M AL WINBORNE AND HERE WITH ME IS FRED OCHS, DIRECTOR OF THE EMPLOYEE PLANS DIVISION AND IRA COHEN, DIRECTOR OF OUR ACTUARIAL DIVISION. THIS IS MY FIRST OPPORTUNITY TO APPEAR BEFORE A CONGRESSIONAL SUBCOMMITTEE SINCE MY NOMINATION ON MAY 1ST TO SUCCEED ALVIN LURIE AS ASSISTANT COMMISSIONER FOR EMPLOYEE PLANS AND EXEMPT ORGANIZATIONS, AND I LOOK FORWARD TO A CONTINUING AND PRODUCTIVE RELATIONSHIP WITH THIS SUBCOMMITTEE. I HAVE BEEN MADE AWARE, MR. CHAIRMAN, OF THE VERY IMPORTANT ROLE YOU PLAYED IN THE DEVELOPMENT OF THE ERISA LEGISLATION, AND I AM ESPECIALLY PLEASED TO HAVE THE OPPORTUNITY TO REPORT TO YOU BEFORE YOUR RETIREMENT. AS PREVIOUSLY ARRANGED WITH THE SUBCOMMITTEE STAFF, MY TESTIMONY WILL ADDRESS THE ITEMS SET FORTH IN YOUR APRIL 17TH LETTER TO COMMISSIONER KURTZ WHICH WERE NOT COVERED BY MR. HALPERIN. THESE INCLUDE: 1) OUR EXPERIENCE IN ADMINISTERING THE PROHIBITED TRANSACTIONS PROVISIONS INCLUDING OUR INTENTIONS REGARDING THE BROKER-DEALER EXEMPTION, 2) OUR COORDINATION WITH OTHER AGENCIES, 3) OUR EFFORTS TO PRODUCE AN ACCURATE "CENSUS" OF EMPLOYEE BENEFIT PLANS, AND 4) OUR EFFORTS TO SIMPLIFY REPORTING AND DISCLOSURE REQUIREMENTS. BEFORE ADDRESSING THE ISSUES, I WOULD LIKE BRIEFLY TO DESCRIBE THE ORGANIZATIONAL STRUCTURE AND THE DIVISIONS OF RESPONSIBILITY WITHIN THE EMPLOYEE PLANS FUNCTION OF THE SERVICE AND TOUCH ON THEIR INTERRELATIONSHIPS WITH THE DEPARTMENT OF LABOR AND THE PENSION BENEFIT GUARANTY CORPORATION. THE FOUNDATION OF OUR ORGANIZATION IS OUR NINETEEN KEY DISTRICT OFFICES. THESE OFFICES HAVE INITIAL JURISDICTION OVER ALL PLAN QUALIFICATION MATTERS AND THE AUTHORITY TO ISSUE DETERMINATION LETTERS WITH RESPECT TO THE INITIAL QUALIFICATION OF EMPLOYEE PLANS PROCESSED IN KEY OR ASSOCIATE DISTRICT OFFICES. THE KEY DISTRICT OFFICES ARE ALSO RESPONSIBLE FOR EXAMINING PLAN OPERATIONS IN ORDER TO INSURE CONTINUED COMPLIANCE WITH APPLICABLE STATUTORY AND ADMINISTRATIVE REQUIREMENTS. IN KEEPING WITH THESE RESPONSIBILITIES, THE DIRECTORS OF THE KEY DISTRICTS ARE EMPOWERED TO REVOKE FAVORABLE DETERMINATION LETTERS, ALTHOUGH THEIR PROPOSED REVOCATIONS MAY NOW BE APPEALED TO THE REGIONAL AND NATIONAL OFFICES UNDER A RECENTLY ISSUED EXAMINATION APPEAL PROCEDURE. THE KEY DISTRICT OFFICES ALSO LEVY THE EXCISE TAXES IMPOSED ON PROHIBITED TRANSACTIONS AND FOR FAILURE TO MEET THE MINIMUM FUNDING STANDARDS AS WELL AS OTHER EXCISE AND PENALTY TAXES IMPOSED BY ERISA. IN ADDITION, THE KEY DISTRICT OFFICES ALSO MAY ISSUE DETERMINATION LETTERS ON PLAN TERMINATIONS. OUR KEY DISTRICTS ARE ORGANIZED UNDER SEVEN REGIONAL OFFICES, AND REPORT DIRECTLY TO AN ASSISTANT REGIONAL COMMISSIONER (EP/EO) WHO IS RESPONSIBLE FOR COORDINATING ACTIVITIES AND INSURING PROCEDURAL UNIFORMITY AMONG KEY AND ASSOCIATE DISTRICT OFFICES WITHIN HIS/HER REGION. A REORGANIZATION OF THE REGIONAL OFFICES IS UNDERWAY AT THE TO MAKE MORE EFFECTIVE USE OF EXISTING RESOURCES AND DOES NOT THE FINAL LEVEL OF AUTHORITY IN OUR ORGANIZATION IS, AS YOU KNOW, BOTH THE PENSION BENEFIT GUARANTY CORPORATION AND THE DEPARTMENT OF LABOR HAVE VERY IMPORTANT RESPONSIBILITIES IN THE EMPLOYEE PLANS AREA WHICH OFTEN RELATE TO THE SERVICE'S FUNCTION. FOR EXAMPLE, DURING THE INITIAL QUALIFICATION PROCESS, THE PBGC HAS THE RIGHT TO SUBMIT WRITTEN COMMENTS WITH REGARD TO THE PLAN. ALSO, ON TERMINATION OF A PLAN INSURED BY THE PBGC, THAT AGENCY HAS THE FINAL WORD ON THE QUESTION OF SUFFICIENCY OF PLAN ASSETS. COORDINATION WITH DOL GENERALLY INVOLVES MOST EMPLOYEE BENEFIT PLANS THAT ARE WITHIN OUR AREA OF RESPONSIBILITY AND WHEN REQUESTED BY A SUFFICIENT NUMBER OF PARTICIPANTS, THE DEPARTMENT OF LABOR MAY ALSO COMMENT UPON AN APPLICATION FOR DETERMINATION. HOWEVER, DOL'S JURISDICTION DOES NOT EXTEND TO GOVERNMENT PLANS, CHURCH PLANS WHICH HAVE NOT ELECTED TO COME UNDER ERISA, AND CERTAIN KEOGH AND CORPORATE PLANS (NAMELY KEOGH PLANS WHICH COVER ONLY SOLE PROPRIETORS OR PARTNERS AND CORPORATE PLANS COVERING ONLY A SOLE STOCKHOLDER AND/OR THE STOCKHOLDER'S SPOUSE). IN ADDITION, INDIVIDUAL RETIREMENT ACCOUNTS (OTHER THAN EMPLOYER ESTABLISHED IRA's) ARE NOT UNDER DOL JURISDICTION. PROHIBITED TRANSACTIONS MOVING NOW TO THE ITEMS MENTIONED IN YOUR LETTER, I WILL START WITH OUR ADMINISTRATION OF THE PROHIBITED TRANSACTIONS PROVISIONS. THE SERVICE'S EXPERIENCE ADMINISTERING THE |