Rev. Rul. 57-326

Where, under an ordinance or statute of a municipality or state, there is an employees' retirement plan, wherein employee participation is compulsory, which contains a provision for the refund of an employee's contributions in the event of termination of his services prior to retirement or death, the amount of such employee's contributions which have been deducted from his salary by the employer each year shall be included in his gross income for Federal income tax purposes. In view of the fact that the employee acquires a vested valuable interest in the fund in the year his contribution is made, the situation is the same, from the standpoint of Federal income taxation, as if he had received in cash the amount paid over to the fund for his benefit. Further, where under such a plan, participation is voluntary and the employee is required to forfeit his own contributions thereunder should his services be terminated prior to retirement or death, the amount of such employee's contributions which have been deducted from his salary by the employer each year shall be included in his gross income. In this latter case, from the standpoint of Federal income taxation, the employee has voluntarily directed that a part of his salary be paid under the plan in order to procure for himself or his beneficiaries benefits of such plan.