Rev. Rul. 71-244

Advice has been requested whether a pension, annuity, profit-sharing, or stock bonus plan covering employees who are not citizens of the United States, whose place of employment is outside the United States, and who are covered by the social security system of a foreign country, will be considered discriminatory within the meaning of section 401(a)(3)(B) or (4) of the Internal Revenue Code of 1954 merely because the contributions or benefits of or on behalf of the employees under the plan do not bear a uniform relationship to compensation, but are designed to supplement benefits provided under that social security system.

Revenue Ruling 69-4, C.B. 1969-1, 118, sets forth guides for the integration of pension, annuity, profit-sharing, and stock bonus plans with benefits under the Social Security Act. As a practical matter, it is not feasible to formulate similar guides for the integration of plan benefits with benefits under the social security laws of each foreign country. Application of Revenue Ruling 69-4 without regard to the provisions of a particular foreign social security system under which employees are covered would permit integration of plans covering such employees and would limit the extent of any discrimination in contributions or benefits. Accordingly, it is concluded that a plan such as that described in the first paragraph hereof will not be considered discriminatory within the meaning of section 401(a)(3)(B) or (4) of the Code merely because it is designed to supplement social security benefits of a foreign country, provided the contributions or benefits provided by such plan satisfy the applicable provisions of Revenue Ruling 69-4, with the following exceptions:

(a) Any reference to the Social Security Act or Federal Insurance Contributions Act applies to the social security law covering the employees participating in such plan,

(b) "Covered compensation" and "taxable wage base" both mean the maximum compensation taken into account in determining social security benefits in the foreign social security system,

(c) Section 6.013 does not apply,

(d) In section 7, only subsection 7.02 applies,

(e) The minimum dollar amounts shown in section 18 are to be expressed as their equivalents in terms of the currency of the country maintaining the foreign social security system, and

(f) Sections 19 and 20 are not applicable.

Disability benefits provided under a pension or annuity plan will be considered integrated if payable only when the disabled employee is also eligible for long-term disability benefits provided under the foreign social security system covering the employees participating in the plan, if the term "disability" is defined and the rules with respect thereto are uniformly and consistently applied to all employees in similar circumstances, and if the benefits do not exceed the limitations of section 2 of Rev. Rul. 69-5, C.B. 1969-1, 125. In applying section 2.03 of Rev. Rul. 69-5, the minimum dollar amounts shown therein are to be expressed as their equivalents in terms of the currency of the country maintaining the foreign social security system. If a plan does not provide that disability benefits are payable only under the conditions just mentioned, such plan benefits will be treated as early retirement benefits subject to the applicable requirements of section 10 or 11 of Rev. Rul. 69-4 (whichever is applicable). In determining whether such requirements are satisfied, a special disabled life mortality table may not be used in the computation of equivalent actuarial values.

Whether a plan which is designed to supplement benefits under a foreign social security system and in which the contributions or benefits do not satisfy the foregoing requirements will be considered discriminatory will depend on the provisions of the plan and the provisions of the particular foreign social security system with which it is intended to be integrated. However, after the publication of this Revenue Ruling, a favorable advance determination letter will not be issued in the case of such a plan if it does not satisfy the requirements of the preceding paragraphs.

In the event Revenue Ruling 69-4 or Revenue Ruling 69-5 is amended or superseded to reflect subsequent amendments to the Social Security Act, this Revenue Ruling will be applicable with the substitution of the analogous pertinent sections of the successor or amended Revenue Ruling or Rulings for the sections of Revenue Ruling 69-4 and Revenue Ruling 69-5 referred to previously in this Revenue Ruling.