Rev. Rul. 70-610

Advice has been requested concerning the proper adjustment to be made to the integration limitation in the case of a spouse's benefit different in amount from the benefit described in section 8.02 of Revenue Ruling 69-4, C.B. 1969-1, 118, regarding the integration of pension, annuity, profit-sharing and stock bonus plans with old-age and survivors insurance benefits provided under the Social Security Act.

Section 8.02 of Revenue Ruling 69-4 states:

If a plan satisfies the requirements of section 4 [of Revenue Ruling 69-4] except that, in case of death before retirement, it provides a benefit to the employee's spouse of a straight life annuity in an amount equal to one-half of the employee's accrued benefit (without regard to the age or sex of the employee's spouse), such plan is integrated if the benefits or the offset to the benefits does not exceed 7/8 of the limitation which would be applicable if the plan did not provide such benefits.

The 7/8 factor referred to above was derived from actuarial computations indicating that, on the basis of reasonable assumptions, the value of a straight life annuity payable to the employee's spouse in an amount equal to one-half of the employee's accrued benefit is approximately equal to 1/7 of the value of the employee's retirement benefit. Using the same method as that under section 8.03 of Revenue Ruling 69-4, the 7/8 factor is equal to the ratio of (a) the value of the employee's retirement benefit (i.e., 1) to (b) the sum of the values of the employee's retirement benefit and the spouse's benefit (i.e., 1 plus 1/7 or 8/7). Correspondingly, the value of the same type of benefit in an amount equal to the employee's accrued benefit would be approximately equal to 2/7 of the value of the employee's retirement benefit. In this case, the ratio of (a) 1 to (b) 1 plus 2/7 or 9/7 leads to a factor of 7/9 applicable in the case of a spouse's benefit equal to the employee's accrued benefit.

Accordingly, if a plan satisfies the requirements of section 4 of Revenue Ruling 69-4 except that, in case of death before retirement, it provides a benefit to the employee's spouse of a straight life annuity in an amount equal to the employee's accrued benefit (without regard to the age or sex of the employee's spouse), such plan is integrated if the benefits or the offset to the benefits does not exceed 7/9 of the limitation which would be applicable if the plan did not provide such benefits.

The appropriate factor for the same type of benefit equal to any other multiple of an employee's accrued benefit may be calculated by the same method. For example, in the case of a spouse's benefit equal to 75 percent of the employee's accrued benefit, the reduction factor is 14/17. (This is equal to the ratio of (a) 1 to (b) 1 plus 75% of 2/7.)

In any case, the spouse's benefit must be incidental, within the meaning of section 1.401-1(b)(1)(i) of the regulations. See Rev. Rul. 70-611 below.

Revenue Ruling 69-4 is hereby amplified.