Rev. Rul. 84-69

1984-1 C.B. 125, 1984-19 I.R.B. 7.

                       Internal Revenue Service
                                 Revenue Ruling

    QUALIFICATION;  EFFECT OF PLAN LANGUAGE ON THE VESTED ACCRUED BENEFIT AT

                             NORMAL RETIREMENT AGE

                             Published: May 7, 1984

Section 411. - -Minimum Vesting Standards, 26 CFR 1.411(a)-1: Minimum vesting standards;  general rules:

  Qualification;  effect of plan language on the vested accrued benefit at normal retirement age.  A plan that limits an employee's right to nonforfeitable benefits to amounts in which the employee already has a nonforfeitable interest pursuant to the plan's vesting schedule does not satisfy the requirements of section 411(a) of the Code.

ISSUE

  Does the retirement plan described below satisfy the minimum vesting provisions of section 411 of the Internal Revenue Code?

FACTS

  An employer maintains a noncontributory retirement plan which includes a vesting schedule under which an employee who has at least 10 years of service has a nonforfeitable right to 100 percent of his accrued benefit.  The vesting schedule satisfies the requirements of the section 411(a)(2)(A) of the Code. In addition, the plan provides that an employee's right to the normal retirement benefit under the plan is nonforfeitable upon attainment of the normal retirement age (which the plan defines as age 65).  Other plan language defines the term normal retirement benefit as the portion of the employee's accrued benefit determined under the plan's vesting schedule to be nonforfeitable.  As a result, employees hired after age 55 who retire at normal retirement age are not entitled to any retirement benefit.

LAW AND ANALYSIS

  Section 401(a)(7) of the Code provides that a plan shall not be a qualified plan under section 401(a) unless it satisfies the requirements of section 411.

  Section 411(a)(2)(A), (B), and (C) of the Code provide vesting schedules, one of which must be satisfied in order to satisfy the requirements of section 411.  In addition, the introductory language of section 411(a) requires that an employee's right to a normal retirement benefit be nonforfeitable upon attainment of normal retirement age.

  Section 411(a)(9) of the Code defines the term normal retirement benefit as the greater of the early retirement benefit or the benefit under the plan commencing at normal retirement age.

  Section 411(a)(7) of the Code defines accrued benefit in general as (1) in the case of a defined benefit plan, the benefit determined under the plan expressed as an annual benefit commencing at normal retirement age or (2) in the case of any other plan, the balance of the employee's account.

  For purposes of section 411 of the Code, the term normal retirement benefit means the individual's accrued benefit, determined without regard to whether such benefit is vested.  Thus, for a plan to satisfy the requirements of section 411, an employee participating in the plan at normal retirement age must have a nonforfeitable right to 100 percent of the employee's accrued benefit irrespective of whether some portion of such accrued benefit would otherwise be forfeitable under the plan's vesting schedule. See Caterpillar Tractor Co. v. Commissioner, 72 T.C. 1088 (1979).

HOLDING

  Because the plan in this case limits an employee's right to nonforfeitable benefits to amounts in which the employee already has a nonforfeitable interest pursuant to the plan's vesting schedule, the plan does not satisfy the requirements of section 411(a) of the Code.

Rev. Rul. 84-69, 1984-1 C.B. 125, 1984-19 I.R.B. 7.