Section 419 of the Tax Relief and Health Care Act of 2006, Public Law 109-432 (120 Stat. 2967) (2006 Act), added sections 163(h)(3)(E), (h)(4)(E), and (h)(4)(F) to the Code. Section 3 of the Mortgage Forgiveness Debt Relief Act of 2007, Public Law 110-142 (121 Stat. 1803) (2007), amended section 163(h)(3)(E)(iv). In general, these new provisions treat certain qualified mortgage insurance premiums as qualified residence interest. This treatment applies only to certain qualified mortgage insurance premiums paid or accrued on or after January 1, 2007, and on or before December 31, 2010, on mortgage insurance contracts issued on or after January 1, 2007.

Section 163(h)(3)(E)(i) provides that premiums paid or accrued for qualified mortgage insurance in connection with acquisition indebtedness for a qualified residence are treated as qualified residence interest for purposes of section 163. Section 163(h)(4)(E) defines qualified mortgage insurance as (i) mortgage insurance provided by the Veterans Administration (VA), the Federal Housing Administration (FHA), or the Rural Housing Administration (Rural Housing)^[2], and (ii) private mortgage insurance (as defined by section 2 of the Homeowners Protection Act of 1998 (12 U.S.C. 4901) as in effect on December 20, 2006). The amount treated as qualified residence interest may be reduced or eliminated under section 163(h)(3)(E)(ii), which provides that the amount allowed as a deduction is phased out ratably by 10 percent for each $1,000 ($500 in the case of a married individual filing a separate return) that the taxpayer’s adjusted gross income exceeds $100,000 ($50,000 in the case of a married individual filing a separate return).

Section 163(h)(4)(F) states that any amount paid by the taxpayer for qualified mortgage insurance that is properly allocable to any mortgage the payment of which extends to periods that are after the close of the taxable year in which the amount is paid shall be chargeable to capital account and shall be treated as paid in the periods to which the amount is allocated. No deduction shall be allowed for the unamortized balance of the account if the mortgage is satisfied before the end of its term. The allocation rules in section 163(h)(4)(F) do not apply to amounts paid for qualified mortgage insurance provided by the VA or Rural Housing. Additionally, section 163(h)(3)(E)(iv)(II) disallows a deduction for amounts allocable to any period after December 31, 2010.

Section 419 of the 2006 Act also added section 6050H(h) to the Code, which generally provides that any person who, in the course of a trade or business, receives from an individual premiums for mortgage insurance aggregating $600 or more for any calendar year, shall make an information return in the form prescribed by the Secretary. As defined in section 6050H(h)(3)(B), the term mortgage insurance has the same meaning as qualified mortgage insurance in section 163(h)(4)(E). See also Tax Technical Corrections Act of 2007, Public Law 110-172 (121 Stat. 2473) §11(b)(2).

On January 8, 2008, the IRS and the Treasury Department published Notice 2008-15, 2008-4 I.R.B. 313, (see §601.601(d)(2)(ii)(b)) to provide guidance to individual taxpayers in determining the amount of prepaid qualified mortgage insurance premiums that is treated as qualified residence interest under section 163(h)(3)(E) that may be deducted in 2007, and to reporting entities receiving premiums, including prepaid premiums, for mortgage insurance in 2007. The notice provides that an individual taxpayer may allocate the prepaid premium ratably over the shorter of (1) the stated term of the mortgage, or (2) 84 months, beginning with the month in which the insurance was obtained. The notice also provides that reporting entities that receive mortgage insurance premiums of $600 or more in 2007 may report either the portion of the amount received that is allocable to 2007, the amount actually received, or the amount determined under an 84-month allocation method. The notice requested comments regarding the appropriate allocation method and reporting requirements that should apply to future years.

In response to Notice 2008-15, the Treasury Department and the IRS received several comments concerning the appropriate allocation methodology for prepaid qualified mortgage insurance premiums that are treated as qualified residence interest under section 163(h)(3)(E). One commenter recommended adopting the rule from Notice 2008-15 permitting taxpayers to allocate a prepaid premium ratably over the shorter of (1) the stated term of the mortgage, or (2) 84 months. According to this commenter, an 84-month allocation rule closely approximates the actual duration of the average mortgage insurance contract. Another commenter suggested adopting a three-year allocation period to coincide with the Department of Housing and Urban Development’s (HUD) policy of refunding prepaid premiums on FHA loans. Under this policy, HUD refunds prepaid FHA mortgage insurance premiums if the borrower refinances the mortgage through another FHA loan within the first three years of the original loan term.

After consideration of these comments, the Treasury Department and the IRS are adopting the rule from Notice 2008-15 concerning allocation of prepaid qualified mortgage insurance premiums based on the understanding that the average life of a mortgage insurance contract on home mortgages generally is seven years (84 months). Accordingly, the temporary regulations add a new provision to the regulations under section 163. Notwithstanding the general rules for the treatment of qualified residence interest (for example, the period over which certain points paid to refinance a mortgage are allocable), §1.163-11T provides that an individual taxpayer may allocate prepaid qualified mortgage insurance premiums that are treated as qualified residence interest under section 163(h)(3)(E) over the shorter of (a) the stated term of the mortgage, or (b) a period of 84 months. Instructions for calculating the portion of prepaid qualified mortgage insurance premiums that are deductible in a particular taxable year are in Publication 936, “Home Mortgage Interest Deduction.”

The Treasury Department and the IRS received several comments in response to Notice 2008-15 concerning the appropriate reporting requirement. Some commenters suggested that mortgage servicers be required to report all mortgage insurance premiums received during the taxable year, including prepayments. Others suggested allowing mortgage servicers to report either (1) the amount of mortgage insurance premiums received, or (2) the amount disbursed during the taxable year to the issuer of the mortgage insurance policy.

After consideration of these comments, the Treasury Department and the IRS are adopting a rule requiring mortgage servicers to report the amount of all mortgage insurance premiums, including prepaid mortgage insurance premiums, received in the calendar year. The temporary regulations accordingly add a new provision to the regulations under section 6050H. Section 1.6050H-3T provides that a reporting entity that receives mortgage insurance premiums of $600 or more from an individual taxpayer during a calendar year shall make an information return setting forth the total amount received from that individual during the calendar year pursuant to the forms and instructions prescribed by the Secretary (currently reported in Box 4 of Form 1098 “Mortgage Interest Statement”).

Several commenters suggested clarifying that there are separate $600 thresholds for reporting mortgage interest under section 6050H(a) and mortgage insurance premiums under section 6050H(h). Several commenters also requested inclusion of a separate standard for penalty relief for reporting mortgage insurance premiums in compliance with section 6050H(h). Such guidance is unnecessary, as sections 6050H(a) and 6050H(h) set forth separate $600 reporting thresholds for mortgage interest received and mortgage insurance premiums received, and the good faith standard for penalty relief in §301.6724-1(a)(2)(i) applies to the reporting of mortgage insurance premiums.

It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. For applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 5), please refer to the Special Analyses section in the preamble to the cross-referenced notice of proposed rulemaking published in this issue of the Bulletin. Pursuant to section 7805(f) of the Code, these regulations have been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business.

Paragraph 1. The authority citation for part 1 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * *

Par. 2. Section 1.163-11T is added to read as follows:

Temporary regulations in this issue of the Bulletin amend the regulations under 26 CFR Part 1 relating to sections 163(h) and 6050H(h). The temporary regulations add rules relating to the proper allocation of prepaid qualified mortgage insurance premiums and provide guidance to reporting entities receiving mortgage insurance premiums. The text of those temporary regulations also serves as the text of these proposed regulations. The preamble to the temporary regulations explains the amendments.

It has been determine that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. Because the regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Code, these regulations have been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

Before these proposed regulations are adopted as final regulations, consideration will be given to any written (a signed original and eight (8) copies) or electronic comments that are submitted timely to the IRS. The IRS and the Treasury Department request comments on the clarity of the proposed rules and how they can be made easier to understand. All comments will be available for public inspection and copying.

A public hearing will be scheduled if requested in writing by any person that timely submits comments. If a public hearing is scheduled, notice of the date, time and place for the public hearing will be published in the Federal Register.

Paragraph 1. The authority citation for part 1 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * *

Par. 2. Section 1.163-11 is added to read as follows:

The collection of information contained in this notice of proposed rulemaking has been submitted to the Office of Management and Budget for review in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collection of information should be sent to the Office of Management and Budget, Attn: Desk Officer for the Department of the Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503, with copies to the Internal Revenue Service, Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:T:SP; Washington, DC 20224. Comments on the collection of information should be received by July 17, 2009. Comments are specifically requested concerning:

Whether the proposed collection of information is necessary for the proper performance of the functions of the Internal Revenue Service, including whether the information will have practical utility;

The accuracy of the estimated burden associated with the proposed collection of information;

How the quality, utility, and clarity of the information to be collected may be enhanced;

How the burden of complying with the proposed collections of information may be minimized, including through the application of automated collection techniques or other forms of information technology; and

Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of service to provide information.

The collection of information in these proposed regulations is in §1.401(k)-3. The collection relates to the new supplemental notice in the case of a reduction or suspension of safe harbor nonelective contributions. The likely recordkeepers are businesses or other for-profit institutions, nonprofit institutions, organizations, and state or local governments.

Estimated total average annual recordkeeping burden: 5,000 hours.

Estimated average annual burden hours per recordkeeper: 1 hour.

Estimated number of recordkeepers: 5,000.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the Office of Management and Budget.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.

This document contains proposed amendments to regulations under sections 401(k) and 401(m) of the Internal Revenue Code.

Section 401(k)(1) provides that a profit-sharing, stock bonus, pre-ERISA money purchase, or rural cooperative plan will not fail to qualify under section 401(a) merely because it contains a qualified cash or deferred arrangement. Section 1.401(k)-1(a)(2) defines a cash or deferred arrangement (CODA) as an arrangement under which an eligible employee may make a cash or deferred election with respect to contributions to, or accruals or other benefits under, a plan that is intended to satisfy the requirements of section 401(a). Contributions that are made pursuant to a cash or deferred election under a qualified CODA are commonly referred to as elective contributions.

In order for a CODA to be a qualified CODA, it must satisfy a number of requirements. For example, contributions under the CODA must satisfy either the nondiscrimination test set forth in section 401(k)(3), called the actual deferral percentage (ADP) test, or one of the design-based alternatives in section 401(k)(11), 401(k)(12), or 401(k)(13). Under the ADP test, the average percentage of compensation deferred for eligible highly compensated employees (HCEs) is compared to the average percentage of compensation deferred for eligible nonhighly compensated employees (NHCEs), and if certain deferral percentage limits are exceeded with respect to HCEs, corrective action must be taken.

Section 401(k)(12) provides a design-based safe harbor method under which a CODA is treated as satisfying the ADP test if the arrangement meets certain contribution and notice requirements. A plan satisfies this safe harbor method if the employer makes specified qualified matching contributions (QMACs) for all eligible NHCEs. The employer can make QMACs under a basic matching formula that provides for QMACs on behalf of each eligible NHCE equal to 100% of the employee’s elective contributions that do not exceed 3% of compensation and 50% of the employee’s elective contributions that exceed 3% but do not exceed 5% of compensation. Alternatively, the employer can make QMACs under an enhanced matching formula that provides, at each rate of elective contributions, for an aggregate amount of QMACs that is at least as generous as under the basic matching formula, but only if the rate of QMACs under the enhanced matching formula does not increase as the employee’s rate of elective contributions increases. In lieu of QMACs, the plan is permitted to provide qualified nonelective contributions (QNECs) equal to 3% of compensation for all eligible NHCEs. In addition, notice must be provided to each eligible employee, within a reasonable period before the beginning of the plan year, of the employee’s rights and obligations under the plan.

Section 401(k)(13), as added by section 902 of the Pension Protection Act of 2006, Public Law 109-280 (PPA ’06), provides an alternative design-based safe harbor for a CODA that provides for automatic contributions at a specified level and meets certain employer contribution and notice requirements. Similar to the design-based safe harbor under section 401(k)(12), section 401(k)(13) provides a choice for an employer between satisfying a matching contribution requirement or a nonelective contribution requirement. Under the matching contribution requirement, the employer can make matching contributions under a basic matching formula that provides for matching contributions on behalf of each eligible NHCE equal to 100% of the employee’s elective contributions that do not exceed 1% of compensation and 50% of the employee’s elective contributions that exceed 1% but do not exceed 6% of compensation. Alternatively, the employer can make matching contributions under an enhanced matching formula that provides, at each rate of elective contributions, for an aggregate amount of matching contributions that is at least as generous as under the basic matching formula at such rate, but only if the rate of matching contributions under the enhanced matching formula does not increase as the employee’s rate of elective contributions increases. In addition, the plan must satisfy a notice requirement under section 401(k)(13) that is similar to the notice requirement under section 401(k)(12).

Except as discussed elsewhere in this preamble, a plan that uses one of these safe harbor methods under section 401(k)(12) or (13) must specify, before the beginning of the plan year, whether the safe harbor contribution will be the safe harbor nonelective contribution or the safe harbor matching contribution and is not permitted to provide that ADP testing will be used if the requirements for the safe harbor are not satisfied.

Section 401(m) sets forth a nondiscrimination requirement that applies to a plan providing for matching contributions or employee contributions. Such a plan must satisfy either the nondiscrimination test set forth in section 401(m)(2), called the actual contribution percentage (ACP) test, or one of the design-based alternatives in section 401(m)(10), 401(m)(11), or 401(m)(12). The ACP test in section 401(m)(2) is comparable to the ADP test in section 401(k)(3).

Under section 401(m)(11), a defined contribution plan is treated as satisfying the ACP test with respect to matching contributions if the plan satisfies the ADP safe harbor of section 401(k)(12) and certain other requirements are satisfied. Similarly, under section 401(m)(12), as added by section 902 of PPA ’06, a defined contribution plan that provides for automatic contributions at a specified level is treated as meeting the ACP test with respect to matching contributions if the plan satisfies the ADP safe harbor of section 401(k)(13) and certain other requirements are satisfied.

Section 403(b) provides favorable tax treatment for the purchase of annuity contracts that satisfy certain requirements. Pursuant to sections 403(b)(1)(D) and 403(b)(12)(A)(i), the purchase of an annuity contract (other than a purchase by a church) is eligible for this favorable tax treatment only if it is part of a plan that meets the requirements of section 401(m), as if it were a qualified plan under section 401(a).

Final regulations under sections 401(k) and 401(m) were published on December 29, 2004. Sections 1.401(k)-3 and 1.401(m)-3 set forth the requirements for a safe harbor plan under sections 401(k)(12) and 401(m)(11), respectively. On February 24, 2009, these regulations were amended to reflect sections 401(k)(13) and 401(m)(12) (T.D. 9447, 2009-12 I.R.B. 694 [74 FR 8200]).

Sections 1.401(k)-3(e)(1) and 1.401(m)-3(f)(1) provide that subject to certain exceptions, a safe harbor plan must be adopted before the beginning of the plan year and be maintained throughout a full 12-month plan year. Accordingly, if, at the beginning of the plan year, a plan contains an allocation formula that includes safe harbor matching or safe harbor nonelective contributions, then the plan may not be amended to revert to ADP or ACP testing for the plan year (except to the extent permitted under §§1.401(k)-3 and 1.401(m)-3).

Sections 1.401(k)-3(f) and 1.401(m)-3(g) permit a plan that provides for the use of the current year ADP or ACP testing method to be amended after the first day of the plan year to adopt the safe harbor method under §1.401(k)-3 or §1.401(m)-3 using safe harbor nonelective contributions, effective as of the first day of the plan year, if certain requirements are satisfied. In particular, the amendment must be adopted no later than 30 days before the last day of the plan year, and the plan must satisfy specified contingent and follow-up notice requirements. Under §§1.401(k)-3(f) and 1.401(m)-3(g), a plan satisfies the contingent notice requirement if the notice is provided before the plan year and specifies that the plan may be amended during the plan year to include the safe harbor nonelective contribution and that, if the plan is amended, a follow-up notice will be provided. A plan satisfies the follow-up notice requirement if, no later than 30 days before the last day of the plan year, each eligible employee is given a notice that states that the safe harbor nonelective contributions will be made for the plan year.

A plan that provides for safe harbor matching contributions will not fail to satisfy section 401(k)(3) or section 401(m)(2) for a plan year merely because the plan is amended during the plan year to reduce or suspend safe harbor matching contributions on future elective contributions, as long as the requirements under §1.401(k)-3(g) or §1.401(m)-3(h) are met. Under these regulations: a notice must be provided to all eligible employees regarding the reduction or suspension of safe harbor matching contributions; the reduction or suspension of safe harbor matching contributions must be effective no earlier than the later of 30 days after eligible employees are provided the notice and the date the amendment is adopted; eligible employees must be given a reasonable opportunity prior to the reduction or suspension of safe harbor matching contributions to change their cash or deferred elections and, if applicable, their employee contribution elections; the plan must be amended to provide that the applicable nondiscrimination tests will be satisfied for the entire plan year; and the plan must satisfy the requirements of §§1.401(k)-3 and 1.401(m)-3 (other than §§1.401(k)-3(g) and 1.401(m)-3(h)) with respect to amounts deferred through the effective date of the amendment.

Sections 1.401(k)-3(e)(4) and 1.401(m)-3(f)(4) provide that, if a plan terminates during a plan year, the plan will not fail to satisfy the requirements of §§1.401(k)-3(e)(1) and 1.401(m)-3(f)(1) merely because the final plan year is less than 12 months, provided that the plan satisfies the requirements of §§1.401(k)-3 and 1.401(m)-3 through the date of termination and either (1) the plan would have satisfied the requirements applicable to a plan amendment to reduce or suspend safe harbor matching contributions (other than the requirement that employees have a reasonable opportunity to change their cash or deferred elections and, if applicable, employee contribution elections) or (2) the termination is in connection with a transaction described in section 410(b)(6)(C) or the employer incurs a substantial business hardship (comparable to a substantial business hardship described in section 412(d)^[3]).

Section 416 sets forth the rules for top-heavy plans. Section 416(g)(4)(H) provides that a top-heavy plan will not include a plan which consists solely of a cash or deferred arrangement that meets the requirements of section 401(k)(12) or 401(k)(13) and matching contributions with respect to which the requirements of section 401(m)(11) or 401(m)(12) are met.

The proposed regulations would amend §§1.401(k)-3 and 1.401(m)-3 to permit an employer sponsoring a safe harbor plan described in section 401(k)(12) or 401(k)(13) that incurs a substantial business hardship (comparable to a substantial business hardship described in section 412(c)) to reduce or suspend safe harbor nonelective contributions during a plan year. These proposed regulations would provide an employer an alternative to the option of terminating the employer’s safe harbor plan in such a situation.

The proposed regulations would allow for the reduction or suspension of safe harbor nonelective contributions under rules generally comparable to the provisions relating to the reduction or suspension of safe harbor matching contributions. Under these rules, a plan that reduces or suspends safe harbor nonelective contributions will not fail to satisfy section 401(k)(3), provided that: (1) all eligible employees are provided a supplemental notice of the reduction or suspension; (2) the reduction or suspension of safe harbor nonelective contributions is effective no earlier than the later of 30 days after eligible employees are provided the supplemental notice and the date the amendment is adopted; (3) eligible employees are given a reasonable opportunity (including a reasonable period after receipt of the supplemental notice) prior to the reduction or suspension of the safe harbor nonelective contributions to change their cash or deferred elections and, if applicable, their employee contribution elections; (4) the plan is amended to provide that the ADP test will be satisfied for the entire plan year in which the reduction or suspension occurs, using the current year testing method; and (5) the plan satisfies the safe harbor nonelective contribution requirement with respect to safe harbor compensation paid through the effective date of the amendment. The proposed regulations would also provide that the supplemental notice requirement is satisfied if each eligible employee is given a notice that explains: (1) the consequences of the amendment reducing or suspending future safe harbor nonelective contributions; (2) the procedures for changing cash or deferred elections and, if applicable, employee contribution elections; and (3) the effective date of the amendment.

The proposed regulations would further provide that these same rules that apply to safe harbor plans under §1.401(k)-3 also apply to safe harbor plans under §1.401(m)-3, except that the plan must be amended to provide that the ACP test will be satisfied for the entire plan year in which the reduction or suspension occurs using the current year testing method.

Because the reduction or suspension of safe harbor contributions can be effective no earlier than the later of 30 days after the notice is provided to all eligible employees and the date the amendment is adopted, an employer that wants to reduce or suspend safe harbor contributions during a year could not implement this change by adopting the amendment at the end of the plan year. In addition, a plan that is amended during the plan year to reduce or suspend safe harbor contributions (whether nonelective contributions or matching contributions) must prorate the otherwise applicable compensation limit under section 401(a)(17) in accordance with the requirements of §1.401(a)(17)-1(b)(3)(iii)(A). Furthermore, a plan that is amended to reduce or suspend safe harbor contributions is no longer a plan described in section 401(k)(12), 401(k)(13), 401(m)(11), or 401(m)(12) for the entire plan year. Accordingly, such a plan is not described in section 416(g)(4)(H) and, thus, will be subject to the top-heavy rules under section 416.

These regulations are proposed to be effective for amendments adopted after May 18, 2009. Taxpayers may rely on these proposed regulations for guidance pending the issuance of final regulations. If, and to the extent, the final regulations are more restrictive than the guidance in these proposed regulations, those provisions of the final regulations will be applied without retroactive effect.

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It has been determined that 5 U.S.C. 533(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. It is hereby certified that the collection of information in these proposed regulations will not have a significant economic impact on a substantial number of small entities. The proposed regulations impact on small businesses is as follows. A pension consultant or attorney must read the regulation. He must then communicate this information to the small business owner. The small business owner must then decide if he wants to reduce nonelective contributions to its safe harbor plan. Once this decision is made, the pension consultant or attorney must draft the notice to employees and the small business must make sure that the employees receive the notice.

We estimate that the cost to do these tasks is $500-$1000. If the small business owner can implement this program by July 1, 2009, he will save 1.5% of his payroll for 2009. A small business with an annual payroll of $1,000,000 can save $15,000 in 2009. Thus, adopting the provisions in these regulation will in almost all cases save the small business owner money. Therefore, an analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required.

Pursuant to section 7805(f) of the Internal Revenue Code, these regulations have been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comments on its impact on small business.

Before these proposed regulations are adopted as final regulations, consideration will be given to any written (one signed and eight (8) copies) or electronic comments that are submitted timely to the IRS. The IRS and Treasury Department specifically request comments on the clarity of the proposed rules and how they can be made easier to understand.

The current regulations, in describing the requirement for safe harbor plans that a notice be provided before the beginning of the plan year, do not address the possibility that safe harbor contributions may be reduced or suspended during the year. Since, under these regulations, safe harbor nonelective contributions, as well as safe harbor matching contributions, can be reduced or suspended during the plan year under certain circumstances, the IRS and Treasury are considering adding to the minimum content listing in §1.401(k)-3(d)(2)(ii), a requirement that the possibility of reduced or suspended safe harbor contributions be described in the notice required to be provided before the beginning of the plan year (except in the case of a contingent notice described in §1.401(k)-3(f)). If adopted, the requirement that the notice describe the possibility of reduced or suspended safe harbor contributions would not apply for plan years beginning before January 1, 2010. The IRS and Treasury specifically request comments on whether the additional content requirement should be added to the regulations.

A public hearing has been scheduled for September 23, 2009, at 10 a.m. in the IRS Auditorium, Internal Revenue Building, 1111 Constitution Avenue, N.W., Washington, DC. Due to building security procedures, visitors must enter at the Constitution Avenue entrance. In addition, all visitors must present photo identification to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance area more than 30 minutes before the hearing starts. For information about having your name placed on the building access list to attend the hearing, see the FOR FURTHER INFORMATION CONTACT section of this preamble.

Persons who wish to present oral comments at the hearing must submit written or electronic comments and submit an outline of the topics to be discussed and the amount of time to be devoted to each topic (a signed original and eight (8) copies) by August 19, 2009. A period of 10 minutes will be allotted to each person for making comments.

An agenda showing the scheduling of the speakers will be prepared after the deadline for receiving outlines has passed. Copies of the agenda will be available free of charge at the hearing.

Paragraph 1. The authority citation for part 1 is amended to read as follows:

Authority: 26 U.S.C. 7805 * * *

Section 1.401(k)-3 is also issued under 26 U.S.C. 401(m)(9)

Par. 2. Section 1.401(k)-0 is amended by revising the entries for §1.401(k)-3(g), (g)(1) and (g)(2) to read as follows: