BIR Ruling [DA-096-01]

May 24, 2001 BIR RULING [DA-096-01] Padilla Law Office 7/F Padilla de los Reyes Bldg. 232 Juan Luna St. Binondo, Manila Attention: Atty . Sabino Padilla, Jr . Gentlemen : This refers to your letter dated December 11, 2001 requesting confirmation that the following steps which Bank of the Philippine Islands (BPI) intends to take as regards the retirement plans of Far East Bank and Trust Co . (FEBTC) and Bank of the Philippine Islands (BPI) will not affect the tax exemption and qualification of the Plan under the Tax Code of 1997: "1. BPI is planning to align the retirement benefits of the employees of BPI and Far East Bank & Trust Co. as a consequence of the final approval of the BPI-FEBTC merger by the Securities and Exchange Commission on April 7, 2000. The retirement plans of both banks were duly approved by your office. TAECaD "2. In order to assure an orderly transition from the FEBTC Retirement Plan to the BPI Retirement Plan, it is proposed that a transition period of two (2) years from the effectivity of the BPI-FEBTC merger be provided, during which any FEBTC employee who retires shall be entitled to the retirement benefits under the FEBTC plan prior to the merger. "3. After the lapse of the two-year period, the BPI retirement plan shall be implemented uniformly for all employees of the merged banks, including ex-FEBTC employees. "4. The BPI Retirement Plan is better for employees with 10 years of service and up. On the other hand, the FEBTC Retirement Plan is better for employees with less than 10 years of service since the vesting starts at five (5) years of service whereas that of BPI starts only the 10th year. The two years transition period will serve the needs of FEBTC employees who may opt to leave during the period since those with years of service between 5 to 10 years will still be entitled to vesting under the FEBTC Plan. However, those employees with tenure above 10 years will still get the benefits under the FEBTC Plan [and] would not take undue advantage of the better benefits under the BPI Retirement Plan." Please be informed that the foregoing steps which BPI intends to take as a result of the merger of FEBTC into BPI including the transitory period of two years during which the FEBTC Plan will apply to ex-FEBTC employees who resign or are otherwise separated from employment are not prejudicial to the employee members and therefore will not affect the qualification of the BPI Retirement Plan under Section 32(B)(6)(a) of the Tax Code of 1997, and the fund created to implement the provisions of the Plan and the retirement pay to qualified retirees remain exempt pursuant to said law. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Acting Assistant Commissioner Legal Service