Rev. Rul. 67-10

The Internal Revenue Service has been requested to state its position on the issuance of advance determination letters regarding qualification under section 401(a) of the Internal Revenue Code of 1954 of pension, annuity, profit-sharing, and stock bonus plans designed to integrate with the old-age and survivors insurance benefits provided by the Social Security Act, pending the development and publication of the rules to be applied under the Social Security Amendments of 1965, Public Law 89-97, C.B. 1965-2, 601.

A plan which satisfies the present integration requirements of section 1.401-3(e) of the Income Tax Regulations will qualify under section 401(a) of the Code until amended regulations are issued or until such later date as may be specified in the amended regulations, provided it continues to meet the requirements of section 401(a) of the Code in all other respects.

Guides for determining whether a plan meets the present integration requirements of section 1.401-3(e) of the regulations are set forth in Mimeograph 5539, C.B. 1943, 499; Mimeograph 6641, C.B. 1951-1, 41; Revenue Ruling 13, C.B. 1953-1, 294; Revenue Ruling 56-692, C.B. 1956-2, 287; and Revenue Ruling 61-75, C.B. 1961-1, 140. Furthermore, a plan which provides benefits or employer contributions only with respect to compensation in excess of a compensation level higher than $4,800 a year will satisfy the present integration requirements of section 1.401-3(e) of the regulations if the rate of benefits or employer contributions with respect to compensation in excess of the compensation level does not exceed the applicable rate determined under the above-mentioned rulings multiplied by the ratio of $4,800 to the compensation level.

For example, a noncontributory plan which: (1) Is limited to employees earning in excess of $6,600 a year, (2) provides no death benefits before retirement, (3) provides normal retirement benefits only in the form of a straight life annuity, and (4) provides such benefits only after completion of 15 years of service and attainment of age 65, will satisfy the present integration requirements of section 1.401-3(e) of the regulations if the normal annual retirement benefits cannot exceed 27.27 percent ( i.e. , 37 1/2 percent multiplied by 4,8 00/6 ,600) of average annual compensation in excess of $6,600, where average annual compensation is defined as the average over the highest 5 consecutive years. As a further example, a noncontributory plan of the type described in (1), (2), (3), and (4) above will satisfy the present integration requirements of section 1.401-3(e) of the regulations if the normal annual retirement benefits cannot exceed 0.909 percent (27.27 percent divided by 30) of actual compensation in excess of $6,600 a year for each year of service.

Determination letters are being issued on plans which satisfy the present integration requirements of section 1.401-3(e) of the regulations as indicated above, and may be relied upon until amended regulations are issued or until such later date as may be specified. Moreover, in no event will changes in benefits accrued to such date be required under plans which satisfy the present integration requirements of section 1.401-3(e) of the regulations.

These interim rules are being announced for the guidance of taxpayers who are establishing new plans, or amending the integration features of existing plans, and need advance assurance as to the current status of their plans. These interim rules should not be interpreted as indicative of the rules which will ultimately be incorporated in the amended regulations.

Determinations as to the qualification of plans intended to integrate with the Social Security Amendments of 1965, but which do not meet the foregoing requirements, cannot be made until amended regulations are issued.

¹ Also released as Technical Information Release 876, dated Dec. 23, 1966.