Rev. Rul. 66-11

Advice has been requested as to the requirement for vesting of an employee's interest under a plan which is intended to qualify under section 401(a) of the Internal Revenue Code of 1954 and for distribution of such interest when an employee reaches normal retirement age, in the case of a pension plan, or attains the stated age, in the case of a profit-sharing or stock bonus plan, including plans covering owner-employees.

Revenue Ruling 65-178, C.B. 1965-2, 94, at page 122, provides in Part 5(g), that an employee who has reached the normal retirement age, in the case of a pension plan, and has fulfilled the service requirement and other uniformly applicable provisions of the plan must be permitted to retire and to commence receiving the benefits payable under the plan. In the case of a profit-sharing or stock bonus plan an employee must be permitted to commence receiving benefits payable upon attainment of a stated age or the occurrence of an event as specified in section 1.401-1(b)(ii) of the Income Tax Regulations. In any case, provision may be made for continued employment beyond normal retirement age, or stated age or occurrence of a specified event, but upon separation from the service of the employer after such age has been attained or event has occurred, distributions must commence. Where, however, an employee has separated from the service before attainment of normal retirement or stated age, the plan may provide for deferment of distributions of his vested interest to a time no later than attainment of such age.

Under section 401(a)(9) of the Code as amended by the Self-Employed Individuals Tax Retirement Act of 1962, Public Law 87-792, C.B. 1962-3, 89, a plan which includes self-employed individuals must provide for the commencement of distributions of an owner-employee's interest no later than age 70 1/2 , or in the case of an employee other than an owner-employee, on retirement if later than age 70 1/2 .

In meeting the requirements for qualification under section 401 of the Code a plan, other than a bond purchase plan within the purview of section 405 of the Code, which includes self-employed individuals will be classified either as a pension plan as defined in section 1.401-1(b)(i) of the regulations, or as a profit-sharing or stock bonus plan as defined in section 1.401-1(b)(ii) and (iii) of the regulations. The rules with respect to normal retirement age in the case of a pension plan, or the stated age in the case of a profit-sharing or stock bonus plan will similarly apply.

Accordingly, a qualified plan must provide for commencement of distributions of an employee's interest no later than actual retirement after attainment of normal retirement age, stated age, or occurrence of a specified event, and completion of service and other reasonable and uniform requirements, except, in the case of an owner-employee, no later than age 70 1/2 .