Rev. Rul. 78-92

Section 1. Purpose.

The purpose of this Revenue Ruling is to clarify the application of Rev. Rul. 71-446, 1971-2 C.B. 187, since the changes made by the Social Security Amendments of 1977 (Public Law No. 95-216, page 462, this Bulletin). Rev. Rul. 71-446 provides guidelines for determining whether the benefits or contributions of a plan integrate properly with the benefits or contributions under social security.

Sec. 2. Social Security Amendments.

The Social Security Amendments of 1977 revised the old law, under which the taxable wage base was determined automatically each calendar year by increasing the old base in proportion to the increase in average wages, by specifically designating the taxable wage bases for 1978 ($17,700), 1979 ($22,900), 1980 ($25,900), and 1981 ($29,700).

Sec. 3. Covered Compensation.

Section 3.02 of Rev. Rul. 71-446 provides tables of covered compensation which are based on the taxable wage bases under the Social Security Act. The ruling states that:

"(a)fter the enactment of any amendment to the Social Security Act affecting any employee's covered compensation, a plan may be amended to provide that the covered compensation of each employee whose benefits have not yet commenced shall be determined on the basis of the Social Security Act as so amended."

For purposes of determining covered compensation in an integrated plan, each increase in the taxable wage base designated for 1978 through 1981 will be considered to be enacted as of January 1 in the calendar year for which the base applies.

Thus, the covered compensation for any participant who separates from service in 1978 shall be determined without regard to any increases in the taxable wage base above the $17,700 taxable wage base in 1978.

Below are Tables I and II which replace Tables I and II in section 3.02 of Rev. Rul. 71-446 for 1978.

                      Covered Compensation 1978

Section 11.01 of Rev. Rul. 71-446 provides two options for computing the allowable offset to a benefit for a participant separating from service before age 65, one of which assumes that the participant:

". . . will continue to receive until reaching age 65 compensation which would be treated as wages for purposes of the Social Security Act at the same rate as he received such compensation at the time of retirement or severance. . ."

For purposes of determining the offset in any integrated plan, each increase in the taxable wage base designated for 1978 through 1981 will be considered to be enacted as of the first day of the calendar year for which such taxable wage base applies.

Thus the offset for any participant who separates from service in 1978 shall be determined without regard to any increases in the taxable wage base above the $17,700 taxable wage base in 1978.

Rev. Rul. 71-446 is clarified.