Rev. Rul. 72-240

Advice has been requested whether the provision described below will prevent an employees' pension plan from qualifying under section 401(a) of the Internal Revenue Code of 1954.

A corporation established an employees' pension plan intended to qualify under section 401(a) of the Code. An annuity option under the plan provides that payments will commence upon the retirement of the employee and will be paid to him for life and thereafter to his designated beneficiary (not necessarily his spouse) for as long as his named spouse shall survive the employee. Under this option, each periodic payment to the beneficiary will be no greater than each payment to the participant during his lifetime.

In general, funds accumulated ??? a qualified plan and trust are intended primarily for distribution to employee participants. Payments to others must be merely incidental. See Rev. Rul. 56-656, C.B. 1956-2, 280.

Section 401(a)(9) of the Code permits distribution over the lives of the participant and his spouse where the plan provides benefits for an owner-employee. The rules governing such plans are intended to be at least as strict as the rules governing plans that benefit common-law employees only. See H.R. Report No. 378, Eighty-Seventh Congress, First Session, C.B. 1962-3, 261. Furthermore, neither section 401(a)(9) nor any other provision of the Code or regulations requires that the spouse actually be the participant's beneficiary. See Rev. Rul. 70-173, C.B. 1970-1, 87.

Accordingly, it is held that the provision in this plan, permitting distribution of a participant's interest over the lives of the employee and his spouse, will not prevent the plan from qualifying under section 401(a) of the Code, even though the employee's beneficiary is somone other than his spouse.