Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 78-57

1978-1 C.B. 128

Sec. 415

IRS Headnote

Mandatory employee contributions. Mandatory employee contributions to a defined benefit pension plan shall be treated as a separate defined contribution plan for purposes of applying the limitations imposed by section 415 of the Code but shall not be considered a separate defined contribution plan for purposes of the $10,000 limitation provided in section 3.03 of Rev. Rul. 75-481.

Full Text

Rev. Rul. 78-57

Advice has been requested as to the proper treatment of mandatory employee contributions to a defined benefit pension plan for purposes of applying the maximum limitations on benefits and contributions imposed by section 415 of the Internal Revenue Code.

Revenue Ruling 75-481, 1975-2 C.B. 188, provides rules with respect to the application of the limitations on benefits and contributions to a qualified plan under section 415 of the Code.

Section 3.01 of Rev. Rul. 75-481 provides that the annual benefit of any participant may not exceed the lesser of $75,000 or 100 percent of the participant's average compensation for his high three consecutive years of service.

Section 3.02(3) provides that in the case of a plan providing for mandatory employee contributions the benefits attributable to such contributions shall not be taken into account for purposes of applying the limitations of section 3.01. Section 3.02(3) also provides that any voluntary employee contributions to a defined benefit plan shall be treated as a separate defined contribution plan for purposes of applying the section 415 limitations.

Although the benefit attributable to any mandatory employee contributions to the defined benefit plan may be ignored when determining whether the benefit lmiitation is satisfied by the defined benefit plan, the contributions should not be ignored entirely. Rather, these contributions should be treated similarly to voluntary employee contributions and considered as a separate defined contribution plan for purposes of applying section 415 of the Code.

Section 3.03 of Rev. Rul. 75-481 provides that a participant's benefit which does not exceed $10,000 shall satisfy the limitations for a defined benefit plan as long as the employer has not at any time maintained a defined contribution plan in which the participant has participated.

Although employee contributions to a defined benefit plan should be treated as a separate defined contribution plan for purposes of applying the section 415 limitations, the mere maintenance of a defined benefit plan to which employees contribute should not be considered as the maintenance of a separate defined contribution plan for purposes of section 3.03 of the Ruling. Thus, a contributory defined benefit plan may utilize the $10,000 limitation.