IRS Ruling Covers Optional Form of Benefits

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Jan. 29 — The Internal Revenue Service on Jan. 29 released a private letter ruling on unsubsidized single sum benefits provided by a company's defined benefit and defined contribution plans.

The document numbers assigned by the IRS to its private letter rulings are composed of three groups of numbers: the first four numbers represent the year; the second group of numbers represents the week in which the document was released; the last three numbers indicate its position in the series of rulings issued that week. For example, PLR 201648023 would be the 23rd ruling of the 48th week of 2016.

The IRS cautions that each ruling is directed only to the taxpayer who requested it. Tax code Section 6110(k)(3) provides that a private letter ruling may not be used or cited as precedent.

PLR Relating to Deferred Compensation 
  • Section 401, qualified pension, profit-sharing, and stock bonus plans. The IRS ruled that an unsubsidized single sum benefit provided by a company's defined benefit plan upon an employee's termination and the single sum benefit provided by the company's defined contribution plan upon an employee's termination can't be treated as a single optional form of benefit, but can be aggregated for nondiscrimination testing purposes (PLR 201605006). 
  • For More Information

    For more information, see Compensation and Benefits Library’s Section 401(k) Plans: Tax Aspects chapter.