Rev. Rul. 69-415

Advice has been requested whether the money purchase pension plan described below fails to qualify under section 401 of the Internal Revenue Code of 1954 because it does not include the restrictions set forth in section 1.401-4(c)(2) of the Income Tax Regulations with respect to the employer contributions that may be used to provide benefits for the "25 highest-paid employees."

The plan provides that all employees who have been employed by the employer for at least two years are participants thereunder. The employer is to make annual contributions equal to five percent of the total compensation of each participant. Upon reaching the normal retirement age of 65 and actually retiring, a participant is entitled to such benefit as can be provided with the accumulated contributions and increments standing to his account.

Section 1.401-4(c)(1) of the regulations provides that the restrictions set forth in section 1.401-4(c)(2) need not be incorporated in a plan at the time it is established where the Commissioner of Internal Revenue determines that such provisions are not necessary to prevent the prohibited discrimination that may occur in the event of an early termination of the plan. Section 1.401-4(a)(2)(i) of the regulations provides that a plan will not be considered discriminatory merely because the contributions or benefits bear a uniform relationship to total compensation or to the basic or regular rate of compensation.

In this case all participants are treated alike with respect to employer contributions and the increments thereon. Contributions bear a uniform relationship to each employee's total compensation and no employee may obtain a disproportionate benefit because of his age or the method of funding. Under these circumstances, failure to incorporate in the plan the restrictions set forth in section 1.401-4(c)(2) of the regulations does not result in the prohibited discrimination.

Accordingly, it is held that the money purchase plan in this case does not fail to qualify merely because it does not contain the restrictions set forth in section 1.401-4(c)(2) of the regulations with respect to limitations on employer contributions that may be used for the benefit of the "25 highest-paid employees."