Rev. Rul. 73-55

In Revenue Ruling 71-152, 1971-1 C.B. 126, a pension plan was terminated for business necessity by an amendment that also provided for the discharge of liabilities under the plan by commuting the payments, without the purchase of insurance company contracts. Pursuant to the plan provisions already in effect, the participants' interests thereunder became nonforfeitable at the time of the termination.

A pension plan and trust qualified under section 401(a) of the Internal Revenue Code of 1954 were terminated by an employer under circumstances similar to those described in Revenue Ruling 71-152, except that, instead of discharging liabilities by payment of commuted values, all liabilities to employees and their beneficiaries covered by the trust, as defined in section 1.401-2(b)(2) of the Income Tax Regulations, were satisfied through the purchase, from a life insurance company, of individual single premium annuity contracts, and the distribution of such contracts to the individuals with respect to whom the liabilities were determined.

Held, the balance remaining in the trust after discharging all liabilities through the purchase and distribution of annuity contracts in the manner described above may be considered surplus arising from actuarial error and returned to the employer.