Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 72-97

1972-1 C.B. 106

Sec. 401

IRS Headnote

An employees' pension plan that provides a preretirement death benefit equal to the amount of the pension benefit funded for a participant as of the date of his death does not qualify under section 401(a) of the Code.

Full Text

Rev. Rul. 72-97

Advice has been requested whether a pension plan may qualify under section 401(a) of the Internal Revenue Code of 1954 if it contains the provisions described below.

The plan provides that participants will receive certain pension benefits upon retirement and the employer will make contributions to the trust under the plan in such amounts as are actuarially determined to be sufficient to provide such benefits. The plan also provides a preretirement death benefit for each participant equal to the amount of the pension benefit funded for that participant as of the date of his death.

Section 1.401-1(b)(1)(i) of the Income Tax Regulations provides that a qualified pension plan is a plan established and maintained by an employer primarily to provide systematically for the payment of definitely determinable benefits to his employees over a period of years, usually for life, after retirement. It also provides that a plan will be considered a qualified pension plan if the employer contributions can be determined actuarially on the basis of definitely determinable benefits. Furthermore, a pension plan may provide for the payment of incidental death benefits through insurance or otherwise.

Since the preretirement death, benefits in the plan under consideration depend upon the amount of pension benefits funded as of the date of each participant's death, such benefits are not definitely determinable. See Revenue Ruling 69-427, C.B. 1969-2, 87, which holds similarly with respect to disability and early retirement benefits.

Accordingly, it is held that the pension plan does not qualify under section 401(a) of the Code.