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under the IRS Employee Plans Closing Agreements Pilot Program
(CAP Program).
On December 21, 1990, approximately 3 months prior to the
issuance of the final revocation letter in the instant case, the
IRS introduced the CAP Program. The CAP Program was designed to
resolve disputes regarding a plan’s qualified status such as plan
disqualification due to the failure to timely amend under TEFRA,
DEFRA, and REA. The CAP Program was made permanent on October 9,
1991.
The CAP Program is outlined in an internal IRS memorandum
dated December 21, 1990. The CAP Program allows plan employers
and key district offices of the IRS to resolve cases of plan
disqualification in a manner that allows for the continued
qualification of a plan. The closing agreement provides for the
correction of the disqualifying defect in a plan and the
imposition of sanctions on the employer for noncompliance. Under
the CAP Program, key district offices were given discretion to
enter into closing agreements as a possible alternative to
revocation of a plan’s qualified status. In entering into such
closing agreements, the general procedures to be followed were
those set forth in IRM 8(13)10, Closing Agreement Handbook, and
in Rev. Proc. 68-16, 1968-1 C.B. 770.
Under the CAP Program, the closing agreement procedure
requires the Employee Plans agent (EP agent) to notify the plan
sponsor of any proposals to disqualify a plan. The EP agent is
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Last modified: May 25, 2011