IRS LISTS QUALIFIED PENSION OR RETIREMENT PLANS FOR PURPOSES OF DIVERSIFICATION REQUIREMENT FOR VARIABLE PRODUCTS.

Rev. Rul. 94-62

This revenue ruling lists arrangements that qualify as a "qualified pension or retirement plan" for purposes of section 1.817- 5(f)(3)(iii) of the Income Tax Regulations.

BACKGROUND

Under section 817(h) of the Internal Revenue Code, a segregated asset account upon which a variable annuity or life insurance contract is based must be adequately diversified in order for the variable contract to be treated as an annuity under section 72 or as a life insurance contract under section 7702. Section 817(h)(4) and section 1.817-5(f) provide that in certain cases diversification may be satisfied under a "look-through" rule. If a "look-through" rule applies with respect to a beneficial interest in a regulated investment company, for example, the diversification requirements are applied by taking into account the assets held by the regulated investment company. One of the requirements for applying the "look- through" rule under section 1.817-5(f)(2)(i) is that all of the beneficial interests in a regulated investment company, partnership or trust be held by one or more insurance companies. In determining whether this requirement is satisfied, section 1.817-5(f)(3)(iii) provides that beneficial interests held by the trustee of a qualified pension or retirement plan are disregarded.

HOLDING

Solely for purposes of section 1.817-5(f)(3)(iii), the term "qualified pension or retirement plan" includes the following arrangements:

1. A plan described in section 401(a) that includes a trust exempt from tax under section 501(a);

2. An annuity plan described in section 403(a);

3. An annuity contract described in section 403(b), including a custodial account described in section 403(b)(7);

4. An individual retirement account described in section 408(a);

5. An individual retirement annuity described in section 408(b);

6. A governmental plan within the meaning of section 414(d) or an eligible deferred compensation plan within the meaning of section 457(b);

7. A simplified employee pension of an employer that satisfies the requirements of section 408(k);

8. A plan described in section 501(c)(18);

9. Any other trust, plan, account, contract, or annuity that the Internal Revenue Service has determined in a letter ruling to be within the scope of section 1.817-5(f)(3)(iii).

DRAFTING INFORMATION

The principal author of this revenue ruling is Laurie D. Lewis of the Office of Assistant Chief Counsel (Financial Institutions and Products). For further information regarding this revenue ruling contact Donald J. Drees on (202) 622-3970 (not a toll-free call).