Rev. Rul. 60-323

Advice has been requested concerning the effect of a provision, in an otherwise qualified employees' pension plan, permitting the participants to withdraw their voluntary contributions which are made in addition to their compulsory contributions.

A retirement plan for the benefit of the employees of a life insurance company is funded under a deposit administration type of arrangement with the employer company acting as insurer. Under the terms of the plan, the employer contributes an amount equal to five percent of each participant's earnings and each participant must contribute four percent of his earnings. The participants may also make additional contributions of from one to six percent of their earnings on a voluntary basis.

The combined contributions by the employer and the employee participants are set aside in a separate fund to which interest of not less than two percent is added annually. This fund represents the reserve for benefits provided for under the plan and is maintained in accordance with applicable state insurance laws to which the employer is subject as a life insurance company. Upon retirement the accumulated employee and employer contributions then standing to a member's credit are applied to provide him with an annuity.

The plan has been held to qualify under section 401(a) of the Internal Revenue Code of 1954.

An amendment to the plan permits any member who has not commenced receiving a retirement benefit under the plan to withdraw his voluntary contributions in amounts of not less than $1,000, without interest. According to the plan, the interest accumulated on any such withdrawn contributions will be forfeited forever by the participant.

Part 2(c)(2) of Revenue Ruling 57-163, C.B. 1957-1, 128, refers to Revenue Ruling 56-693, C.B. 1956-2, 282, and holds that although a pension plan may provide incidental benefits prior to normal retirement, such as disability and death benefits, it will fail of qualifications it is permits participants, prior to severance of employment or termination of the plan, to withdraw all or part of the funds accumulated on their behalf, except their own contributions on discontinuance of participation.

Under the terms of the plan in question, when a participant exercises the right to withdraw his voluntary contributions, it shall in no way affect his participation in the plan, the employer's past or future contributions on his behalf, or the basic benefits provided by both the participant's and the employer's nonwithdrawable contributions Further, no interest is allowable with respect to the contributions withdrawn either at the time of withdrawal or in computing benefits at retirement.

Accordingly, it is held that, under the facts of the present plan, the provision permitting participants to withdraw their own voluntary contributions will not, of itself, disqualify the otherwise qualified plan.

Revenue Ruling 56-693, C.B. 1956-2, 282, and Part 2(c)(2) of Revenue Ruling 57-163, C.B. 1957-1, 128, are hereby modified to the extent that a pension plan will not be denied qualifications because it contains provisions permitting a participant to withdraw his voluntary contributions which are made in addition to his compulsory contributions, where such withdrawals do not affect the member's participation in the plan, the employer's past or future contributions on his behalf, the basic benefits provided by both the participant's and the employer's compulsory contributions, and, under the provisions of the plan, no interest is allowable with respect to the contributions withdrawn either at the time of withdrawal or in computing benefits at retirement.