Rev. Rul. 63-270

Advice has been requested whether a lump-sum payment received by a retired teacher in accordance with the provisions of a legislative amendment to the New Jersey retirement plan enacted to provide reimbursement for retirement benefits lost due to a change in the Federal social security law constitutes back pay within the meaning of section 1303 of the Internal Revenue Code of 1954.

A is one of a limited group of older teachers who, in 1956, along with the other teachers in New Jersey, voted to integrate the state retirement plan for teachers with the Federal social security retirement plan. Under the integrated plan, retired teachers receive full benefits under the Federal social security law and receive from the New Jersey retirement plan the difference between the full benefits that the New Jersey Plan provided for before integration and the benefits received under the social security law. It had been represented to the limited group of teachers that if they retired before the age of 65, they would receive the full benefits of both plans.

In November of 1956 when the retirement-age for women, under the Federal social security law, was changed from 65 to 62, the women in this group of older teachers, who had not retired before the change, were deprived of receiving full benefits of both pensions. Subsequently, when they did retire, they received only a sum equal to the amount provided for in the New Jersey pension plan, after the social security benefit had been taken into account.

In 1962, the State legislature amended the State pension plan by restoring, retroactively, to the aforementioned individuals the full benefits of both plans.

A , under the 1962 amended State plan, received 6 x dollars in payment for the preceding 5 years.

Section 1303 of the Code defines `back pay,' in part, as follows:

(b) DEFINITION OF BACK PAY.-For purposes of this section, the term `back pay' means amounts includible in gross income under this subtitle which are one of the following-

(1) Remuneration, including wages, salaries, retirement pay, and other similar compensation, which is received or accured during the taxable year by an employee for services performed before the taxable year for his employer and which would have been paid before the taxable year except for the intervention of one of the following events:

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(B) dispute as to the liability of the employer to pay such remuneration, which is determined after the commencement of court proceedings;

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(D) any other event determined to be similar in nature under regulations prescribed by the Secretary or his delegate.

Revenue Ruling 59-48, C.B. 1959-1, 223, holds that a private Congressional law providing for a retroactive pay adjustment to reimburse an individual for loss resulting from an administrative error is an event determined to be similar in nature to a dispute as to the liability of the employer to pay such remuneration, which is determined after the commencement of court proceedings.

The principle set forth in Revenue Ruling 59-48 that relief granted by the legislative branch is similar in nature to relief granted by the judicial branch is controlling in the instant case.

Accordingly, it is held that the payment received by A constitutes back pay subject to the provisions of section 1303(a) of the Code.