Rev. Rul. 69-252

The purpose of this Revenue Ruling is to update and restate, under the current statute and regulations, the position set forth in PS No. 56, dated June 27, 1946. This ruling relates to the notification by a trustee of the termination of a pension, profit-sharing, or stock bonus plan previously held to meet the requirements of section 401(a) of the Internal Revenue Code of 1954.

An employees' trust constituting part of a plan that meets the requirements of section 401(a) of the Code is exempt from Federal income tax under section 501(a). A trust, however, may be exempt in one year and not necessarily in another. For example, section 401(a)(6) of the Code provides that a plan shall be considered as meeting the requirements with respect to eligibility for participation during the whole of any taxable year of the plan if on one day in each quarter it satisfies such requirements. Furthermore, a plan that ostensibly qualified when established but was abandoned within a few years thereafter may be held from its inception not to have been a bona fide program for the exclusive benefit of employees in general. In the event a plan is abandoned, the employer should promptly notify the district director, stating the circumstances that led to the discontinuance of the plan. See section 1.401-1(b)(2) of the Income Tax Regulations.

Upon a determination that a plan was, from its inception, not a bona fide program for the exclusive benefit of employees in general, and therefore not qualified under section 401(a) of the Code, a liability for taxes on the income of the related trust may arise. Therefore, consistent with the purpose of the foregoing provision of the regulations, the trustee should similarly notify the district director of the termination of the plan before making distribution of the assets of the trust. A determination will then be made concerning the tax effects of the termination and the trustee will be advised with respect thereto.

PS No. 56 is hereby superseded, since the position stated therein is restated under the current law in this Revenue Ruling.

¹ Prepared pursuant to Rev. Proc. 67-6, C.B. 1967-1, 576.