Rev. Rul. 80-349

The Service has reconsidered Rev. Ruls. 56-213, 1956-1 C.B. 194; 70-126, 1970-1 C.B. 95; 72-531, 1972-C.B. 221; and 62-139, 1962-2 C.B. 123. All of these revenue rulings deal with whether a pension plan will fail to satisfy the requirements of section 401(a) of the Internal Revenue Code merely because it provides benefits for some participants that duplicate the benefits already provided for those participants under the same plan or the plan of a prior employer.

Employer M maintains a defined benefit pension plan that provides for a normal retirement benefit equal to 50 percent of final average pay. The plan does not contain any provisions to prevent a duplication of benefits for rehired participants. Thus, it is possible for an individual who had previously been a participant, separated from service, and received payment for his or her entire nonforfeitable interest, to reenter the plan upon being rehired and receive the entire "50 percent of pay" normal retirement benefit without offset for the previous payments

Rev. Rul. 56-213 dealt with a plan that permitted reinstatement of former participants and concluded that if the terms of the plan were uniformly applied and the full actuarial equivalent of the amount already vested in the participant was deducted from the benefit to be paid on account of the new participation, then the qualification of the plan would not be adversely affected.

Rev. Rul. 70-126 dealt with the issue under consideration and concluded that so long as the provisions did not discriminate within the meaning of section 401(a)(4) of the Code and did not result in a duplication of benefits, the providing of benefits for reinstated participants would not adversely affect the qualification of the plan under section 401(a). Although this ruling dealt with a situation where there was no duplication of benefits, the ruling stated that this characteristic was necessary to support the conclusion.

Rev. Rul. 62-139 dealt with the discrimination issue relative to allowing prior service credit to be used for eligibility and benefit purposes, and concluded, among other things, that prior service credit could not be used if the prior service had resulted in vested pension rights for the employee.

Rev. Rul. 72-531 also dealt with prior service credit and held that a plan that provides credit for service with the employee's immediate prior employer must contain a provision to preclude duplication of benefits if the plan is to be qualified under section 401(a).

There is not provision in the Code or in the Income Tax Regulations which specifically prohibits duplication of benefits. However, section 1.401-1(b)(1)(i) of the regulations defines a pension plan, within the meaning of section 401(a), as a plan established and maintained by an employer to provide definitely determinable benefits to employees after retirement.

Rev. Rul. 74-385, 1974-2 C.B. 130, provides that, in the case of a defined benefit plan, the definitely determinable benefit requirement of section 1.401-1(b)(1)(i) of the regulations is satisfied where the benefits for each participant can be computed in accordance with an express formula contained in the plan that is not subject to the discretion of the employer. The benefit formula contained in the plan described in this ruling satisfies the requirements of Rev. Rul. 74-385.

Accordingly, the pension plan of Employer M will not fail to qualify under section 401(a) of the Code merely because it provides benefits for some participants which duplicate the benefits already provided for those participants under the same plan.

This revenue ruling does not deal with whether duplication of benefits under a plan as described will violate the prohibition against discrimination as provided under section 401(a)(4) of the Code, or provide benefits in excess of the limits of section 415 of the Code.

Rev. Ruls. 56-213, 70-126, and 72-531 are revoked; and Rev. Rul. 62-139 is modified only to the extent that it required non-duplication of benefits.