BIR Ruling

March 14, 1974 Central Luzon Educational Center Cabanatuan City Gentlemen : In reply to your letter dated March 1, 1974, I have the honor to inform you that R.A. 4917 envisages a reasonable retirement plan, and, therefore, the privileges prescribed by the law cannot be availed of if a plan is unreasonable in its operations. This accounts for the necessity of prior processing of a retirement plan. Without the requirement on reasonableness, retirement benefit plans can be utilized as a convenient vehicle to favor the officers and shareholders of a corporation or employees whose principal duties consists in supervising the work of other employees or highly compensated employees as against other employees whether within or without the plan. The requirement, therefore, serves as a protection to the rank and file employees against undue discrimination which in fact the law intends to secure. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN-1601-593-5