Rev. Rul. 71-24

Advice has been requested whether, under the circumstances described below, the benefits provided under a trusteed pension plan, intended to qualify under section 401(a) of the Internal Revenue Code of 1954, are definitely determinable if the amounts available to a participant at normal retirement age may be invested by the trustee until the participant's actual retirement date.

The plan provides for a monthly benefit, to commence at normal retirement age 65, equal to 40 percent of each participant's career average compensation. The plan is funded by individual retirement income contracts. The plan provides that any participant may elect to postpone his retirement beyond the normal retirement age of 65. In the event retirement is postponed, the trustee must either (1) take the action necessary to defer the beginning of monthly retirement payments until actual retirement, or (2) at the participant's election, surrender the policy held on behalf of the participant, allocate the amounts received to a separate account, and invest such amounts in securities designated by the participant. If the funds are invested, the participant's account is periodically adjusted to reflect the income or loss resulting from such investment.

Section 1.401-1(b)(1)(i) of the Income Tax Regulations provides that a pension plan within the meaning of section 401(a) of the Code is a plan established and maintained by an employer primarily to provide systematically for the payment of definitely determinable benefits to his employees over a period of years, usually for life, after retirement.

The normal retirement age is the time from which definitely determinable benefits under a pension plan become fixed and payable. An employee who has reached such age nd 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 thereunder. Arrangements, however, may be mutually made for continued employment beyond normal retirement age. In such event, provision may be made with respect to the treatment of the pension benefits such as, for example, payment as though the employee had actually retired, deferment to actual retirement without increment for the interval between the normal retirement date and actual retirement, or actuarial equivalent on actual retirement of the benefit at normal retirement age. Whatever provisions are made, however, must be uniformly applied to all participants.

In this case, the benefits to which a participant will become entitled at normal retirement age are definitely determinable by means of the express benefit formula contained in the plan and contracts. The value of these benefits will be set aside for any participant who reaches normal retirement age and the provisions for treatment of benefits where a participant continues his employment beyond normal retirement age are uniformly applicable to all participants.

Accordingly, it is held that the benefits provided by this plan are definitely determinable within the meaning of section 1.401-1(b)(1)(i) of the regulations.