Rev. Rul. 67-261

The Internal Revenue Service has been requested to state its position on the issuance of advance determination letters regarding qualification under section 401(a) of the Internal Revenue Code of 1954 of pension and annuity plans designed to integrate with the benefits provided by the Railroad Retirement Act of 1937, pending the development and publication of the rules to be applied under that Act as amended by Public Law 89-212. Excerpts from Public Law 89-212 which involve revenue matters are published in the Cumulative Bulletin 1965-2, 623.

A plan which satisfies the present integration requirements of section 1.401-3(e)(4) of the Income Tax Regulations will qualify under section 401(a) of the Code until amended regulations are issued or until such later date as may be specified in the amended regulations or an applicable Revenue Ruling, provided it continues to meet the requirements of section 401(a) of the Code in all other respects.

Guides for determining whether a plan, which is intended to be integrated with the Railroad Retirement Act of 1937 as in effect prior to the amendments made by Public Law 89-212, and which provides benefits or employer contributions only with respect to compensation in excess of $4,800 a year, meets the present integration requirements of section 1.401-3(e)(4) of the regulations, are set forth in Revenue Ruling 61-147, C.B. 1961-2, 102. Furthermore, such a plan which provides for benefits or employer contributions only with respect to compensation in excess of a minimum compensation level higher than $4,800 a year will satisfy the present integration requirements of section 1.401-3(e)(4) of the regulations if the requirements of that Revenue Ruling are otherwise met and the rate of benefits or employer contributions with respect to compensation in excess of the minimum compensation level does not exceed the applicable rate determined under Revenue Ruling 61-147 multiplied by the ratio of $4,800 to the minimum compensation level.

For example, a noncontributory plan which (1) is limited to employees earning in excess of $5,400 a year, (2) provides no death benefits before retirement, (3) provides normal retirement benefits only in the form of a straight life annuity, and (4) provides such benefits only after attainment of age 65, will satisfy the present integration requirements of section 1.401-3(e)(4) of the regulations if the normal annual retirement benefits for each year of credited service cannot exceed 1.556 percent (i.e., 1.75 percent multiplied by 4,8 00/5 ,400) of actual compensation in excess of $5,400 a year.

As a further example, a noncontributory plan which satisfies conditions (2), ( 3), and (4) above, and which is limited to employees earning in excess of $6,600 a year, will satisfy present integration requirements if the normal annual retirement benefits for each year of credited service cannot exceed 1.273 percent (1.75 percent multiplied by 4,8 00/6 ,600) of actual compensation in excess of $6,600 a year.

Determination letters are being issued on plans which are intended to integrate with the Railroad Retirement Act of 1937 and which satisfy the present integration requirements of section 1.401-3(e)(4) of the regulations as indicated above, and may be relied upon until amended regulations are issued or until such later date as may be otherwise specified. Moreover, in no event will changes in benefits accrued to such date be required under plans which satisfy the present integration requirements of section 1.401-3(e)(4) of the regulations.

Determinations as to the qualification of plans intended to integrate with the Railroad Retirement Act of 1937 as amended in 1965, but which do not meet the foregoing requirements, cannot be made until after the issuance of amended regulations or an applicable Revenue Ruling.