Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 78-48

1978-1 C.B. 115

Sec. 401
Sec. 412

IRS Headnote

Funding method and actuarial assumptions specified in plan document. A defined benefit pension plan will not fail to satisfy the requirements of section 401(a) of the Code merely because the funding method and the actuarial assumptions to be used for funding are specified in the plan document. The charges and credits to the minimum funding standard, however, are not automatically deemed to be properly computed merely because they are computed in accordance with such funding method and actuarial assumptions.

Full Text

Rev. Rul. 78-48

Advice has been requested as to whether (1) a defined benefit pension plan fails to satisfy the requirements of section 401(a) of the Internal Revenue Code of 1954 merely because the funding method and the actuarial assumptions to be used for funding are specified in the plan document, and (2) the charges and credits to the minimum funding standard are computed properly merely because such charges and credits are computed in accordance with the funding method and actuarial assumptions specified in the plan document.

A defined benefit pension plan specifies the actuarial method and assumptions that should be used for purposes of determining the amount of employer contributions to the plan. Nothing in section 401(a) of the Code either requires or precludes a plan from specifying such method or assumptions. Accordingly, the plan will not fail to satisfy the requirements of section 401(a) of the Code merely because such method or assumptions are specified.

In computing the charges and credits to the funding standard account in the case of a defined benefit pension plan, the actuarial assumptions must be reasonable in the aggregate. There is no exception to this requirement as a result of a plan provision which specifies the appropriate assumptions or methods to be used. Thus, if the assumptions specified in the plan are not reasonable in the aggregate or if the funding method is not acceptable, the charges and credits to the funding standard account will not be computed properly.