Rev. Rul. 72-276

Advice has been requested whether benefits provided by an excess plan, as defined by section 2.06 of Revenue Ruling 71-446, C.B. 1971-2, 187, are properly integrated with benefits provided under the Social Security Act in accordance with section 1.401-3(e) of the Income Tax Regulations and Revenue Ruling 71-446, if the excess plan benefits are based on compensation averaged over a period of either three or four consecutive years, under a uniform rule which is used for all employees.

Section 1.401-3(e)(2)(ii) of the regulations states, in effect, that a plan is integrated where the rate at which normal annual retirement benefits are provided for any employee with respect to his average annual compensation in excess of the plan's integration level applicable to him does not exceed 371/2%, where average annual compensation is defined to mean the average annual compensation over the highest 5 consecutive years, and where certain other conditions specified in subsections (a), (d), (e), (f), (g), and (h) of such section are satisfied. Section 1.401-3(e)(2)(v) of the regulations states, in pertinent part, that in the case of an integrated plan providing benefits different from those described in section 1.401-3(e)(2)(ii) of the regulations, the plan will be considered to be properly integrated only if, as determined by the Commissioner, the benefits provided thereunder by employer contributions cannot exceed in value the benefits described in such section 1.401-3(e)(2)(ii).

Section 3.01 of Revenue Ruling 71-446 states that an excess plan must provide that an employee's average annual compensation is his annual compensation averaged over a period of at least five consecutive years (or total period of service, if less than five years) under a uniform rule applicable to all employees.

Revenue Ruling 71-446 is hereby modified, in accordance with section 1.401-3(e)(2)(v) of the regulations, to provide that, in an excess plan, an employee's average annual compensation may be his annual compensation averaged over a period of three consecutive years or four consecutive years under a uniform rule which is used for all employees, if the integration limit otherwise applicable (were compensation to be averaged over a period of five consecutive years) is multiplied by 90% or 95%, respectively.