Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

Section 72.—Annuities; Certain Proceeds of Endowment and Life Insurance Contracts

Does the 10 percent additional tax on early withdrawals from individual retirement accounts apply to early withdrawals used to pay qualified higher education expenses. See Notice 97–60, page 00.

Section 127.—Educational Assistance Programs

What conditions apply to the extension of taxfree treatment of employer-provided educational assistance under the Taxpayer Relief Act of 1997. See Notice 97–60, page 00.

Section 170.—Charitable, Etc., Contributions and Gifts

26 CFR 1.170A–1: Charitable, etc., contributions and gifts; allowance of deduction.

What are the rules for the deductibility, under § 162 or 170, of unreimbursed travel and other outof-pocket expenses incurred by a member of a federal advisory committee while performing services without compensation for the federal government as a member of that committee. See Rev. Proc. 97–52, page 00.

Section 221.—Interest on Education Loans

What are the rules for deducting interest on education loans under section 221, added by the Taxpayer Relief Act of 1997. See Notice 97–60, page 00.

Section 401.—Qualified Pension, Profit-Sharing, And Stock Bonus Plans

26 CFR 1.401(l)-1: Permitted disparity with respect to employer-provided contributions or benefits.

Covered compensation tables; 1998. The covered compensation tables for the 1998 calendar year for determining contributions to defined benefit plans and permitted disparity are set forth.

Rev. Rul. 97–45

This revenue ruling provides tables of covered compensation under § 401(l)(5)(E) of the Internal Revenue Code (the “Code”) and the Income Tax Regulations, thereunder, for the 1998 plan year.

Section 401(l)(5)(E)(i) defines covered compensation with respect to an employee, as the average of the contribution and benefit bases in effect under § 230 of the Social Security Act (the “Act”) for each year in the 35-year period ending with the year in which the employee attains social security retirement age.

Section 401(l)(5)(E)(ii) of the Code states that the determination for any year preceding the year in which the employee attains social security retirement age shall be made by assuming that there is no increase in covered compensation after the determination year and before the employee attains social security retirement age.

Section 1.401(l)–1(c)(34) of the regulations defines the taxable wage base as the contribution and benefit base under § 230 of the Act.

Section 1.401(l)–1(c)(7)(i) defines covered compensation for an employee as the average (without indexing) of the taxable wage bases in effect for each calendar year during the 35-year period ending with the last day of the calendar year in which the employee attains (or will attain) social security retirement age. A 35-year period is used for all individuals regardless of the year of birth of the individual. In determining an employee’s covered compensation for a plan year, the taxable wage base for all calendar years beginning after the first day of the plan year is assumed to be the same as the taxable wage base in effect as of the beginning of the plan year. An employee’s covered compensation for a plan year beginning after the 35-year period applicable under § 1.401(l)–1(c)(7)(i) is the employee’s covered compensation for a plan year during which the 35-year period ends. An employee’s covered compensation for a plan year beginning before the 35-year period applicable under this § 1.401(l)– 1(c)(7)(i) is the taxable wage base in effect as of the beginning of the plan year.

Section 1.401(l)–1(c)(7)(ii) provides that, for purposes of determining the amount of an employee’s covered compensation under section 1.401(l)–1(c)(7)(i), a plan may use tables, provided by the Commissioner, that are developed by rounding the actual amounts of covered compensation for different years of birth.

For purposes of determining covered compensation for the 1998 year the taxable wage base is $68,400.

The following tables provide covered compensation for 1998:

1998 Covered Compensation Table

Calendar Calendar Year of 1998 Covered Year of Social Security Compensation Birth Retirement Age

1907 1972 $4,488

1908 1973 4,704

1909 1974 5,004

1910 1975 5,316

1911 1976 5,664

1912 1977 6,060

November 17, 1997 4 1997–46 I.R.B.

1998 Covered Compensation Table—Continued

Calendar Calendar Year of 1998 Covered Year of Social Security Compensation Birth Retirement Age

1913 1978 6,480

1914 1979 7,044

1915 1980 7,692

1916 1981 8,460

1917 1982 9,300

1918 1983 10,236

1919 1984 11,232

1920 1985 12,276

1921 1986 13,368

1922 1987 14,520

1923 1988 15,708

1924 1989 16,968

1925 1990 18,312

1926 1991 19,728

1927 1992 21,192

1928 1993 22,716

1929 1994 24,312

1930 1995 25,920

1931 1996 27,576

1932 1997 29,304

1933 1998 31,128

1934 1999 32,940

1935 2000 34,752

1936 2001 36,528

1937 2002 38,292

1938 2004 41,748

1939 2005 43,488

1940 2006 45,216

1941 2007 46,908

1942 2008 48,552

1943 2009 50,136

1944 2010 51,684

1945 2011 53,208

1946 2012 54,684

1947 2013 56,136

1948 2014 57,432

1949 2015 58,644

1950 2016 59,760

1997–46 I.R.B. 5 November 17, 1997

1998 Covered Compensation Table—Continued

Calendar Calendar Year of 1998 Covered Year of Social Security Compensation Birth Retirement Age

1951 2017 60,780

1952 2018 61,716

1953 2019 62,592

1954 2020 63,420

1955 2022 64,872

1956 2023 65,544

1957 2024 66,120

1958 2025 66,612

1959 2026 67,044

1960 2027 67,404

1961 2028 67,716

1962 2029 67,944

1963 2030 68,148

1964 2031 68,304

1965 or later 2032 68,400

1998 Rounded Covered Compensation Table

Year of Birth Covered Compensation

1933 $30,000

1934 33,000

1935 – 1936 36,000

1937 39,000

1938 – 1939 42,000

1940 45,000

1941 – 1942 48,000

1943 – 1944 51,000

1945 – 1946 54,000

1947 – 1948 57,000

1949 – 1951 60,000

1952 – 1954 63,000

1955 – 1959 66,000

1960 or later 68,400

November 17, 1997 6 1997–46 I.R.B.

Drafting Information

The principal author of this revenue ruling is Donna Prestia of the Employee Plans Division. For further information regarding this notice, call (202) 622-6076 between 2:30 and 3:30 Eastern time (not a toll free number) Monday thru Thursday. Ms. Prestia’s number is (202) 622-7377 (also not a toll free number).

Section 529.—Qualified State Tuition Programs

How have the rules for qualified state tuition programs been changed by the Taxpayer Relief Act of 1997. See Notice 97–60, page 00.

Section 530.—Education Individual Retirement Accounts

What are the rules for education individual retirement accounts, as enacted by the Taxpayer Relief Act of 1997. See Notice 97–60, page 00.

Section 817.—Treatment of Variable Contracts

26 CFR 1.801–8: Contracts with reserves based on segregated asset accounts.

A life insurance company is not prohibited from transferring assets other than cash from its general asset account to a segregated asset account for qualified pension plans. Rev. Rul. 73–67 is revoked. See Rev. Rul. 97–46, page 00.

Insurance companies; segregated asset accounts. A life insurance company is not prohibited from transferring assets other than cash from its general asset account to a segregated asset account for qualified pension plans. Rev. Rul. 73–67 revoked.

Rev. Rul. 97–46

Rev. Rul. 73–67, 1973–1 C.B. 330, held that asset transfers between a life insurance company’s general asset account and its segregated asset account for qualified pension plans may be made only in cash. Rev. Rul. 73–67 is hereby revoked.

EFFECT ON OTHER REVENUE RULINGS

Rev. Rul. 73–67 is revoked.

DRAFTING INFORMATION

The principal author of this revenue ruling is Campbell Connell of the Office of the Assistant Chief Counsel (Financial Institutions & Products). For further information regarding this revenue ruling contact Mr. Connell on (202) 622-3970 (not a toll free call).

1997–46 I.R.B. 7 November 17, 1997