Rev. Rul. 68-25

Advice has been requested whether a qualified employees' contributory pension plan may provide that the employer-grantor may elect to make an additional contribution as a substitute for the employees' contributions.

An employer established an employees' trusteed pension plan intended to qualify under section 401(a) of the Internal Revenue Code of 1954. The amounts to be contributed each year under the plan consist of both employer and employee contributions. Under the terms of the plan, the employer may elect to make an additional contribution as a substitute for the otherwise required employee contributions. The total amount to be contributed during a taxable year will not be affected by the employer's election to make the additional contribution.

Section 1.401-1(b)(1)(i) of the Income Tax Regulations provides that a pension plan, within the meaning of section 401(a) of the Code, must provide for the payment of definitely determinable benefits. However, these definitely determinable benefits may be provided entirely from employer contributions, entirely from employee contributions, or from both. See Rev. Rul. 66-205, C.B. 1966-2, 119.

Accordingly, it is held that the provision in the pension plan permitting the employer to make a contribution in any year, in place of all or part of the employees' contribution otherwise required, will not cause the plan to fail of qualification under section 401(a) of the Code, provided it otherwise meets the requirements therefor.

Compare Revenue Ruling 54-152, C.B. 1954-1, 149, involving a qualified plan under which the employer, who did not contribute to the trust, was committed to pay the full amount of the stipulated retirement benefits to each retired employee after the trust funds had been exhausted.