Philippine Fire and Marine Insurance Corporation

October 16, 2009 BIR RULING [DA-(C-236) 609-09] 28 (b) (7) (A) 00-078 371-88; DA 371-88 Philippine Fire and Marine Insurance Corporation 5th Floor Lepanto Building 8747 Paseo de Roxas Makati City Attention: Atty. Ma. Belina B. Mariano Gentlemen : This refers to your letter dated January 15, 2009 stating that PHILIPPINE FIRE AND MARINE INSURANCE CORPORATION (PHILFIRE), with TIN No. 047-000-487-531-V, has decided to discontinue/terminate the Employee's Retirement Plan of Philippine Fire and Marine Insurance Corporation (RETIREMENT PLAN) since it decided to implement a Cost Reduction Program; that it has paid all its employees the benefits due them under said plan. Based on the foregoing representations, you now request a ruling that, as all charges and liabilities under Article XI of the Plan have been satisfied, whatever has remained of the fund shall be reverted to PHILFIRE. In reply, please be informed that Republic Act No. 4917 [now Sec. 28 (b) (7) (A), Tax Code] provides that "at no time shall any part of the corpus or income of the fund be used for, or diverted to, any purpose other than for the exclusive benefit of the said officials and employees". This provision prohibiting diversion of trust fund includes all objects or aims not solely designed for the proper satisfaction of all liabilities to employees covered by the trust. [Sec. 4 (e), Revenue Regulations No. 1-68 as amended by Revenue Regulations No. 1-83 implementing Section 28 (b) (7) (A), Tax Code] In other words, recovery by the employer of trust funds is permitted after the satisfaction of all liabilities to employees or their beneficiaries. In the instant case, therefore, since all the liabilities of employees and their beneficiaries under the approved retirement plan have been fully satisfied, and excess in the retirement fund may be recovered by the company. However, such excess recovered must be declared by the company for income tax purposes during the year of receipt. HAaDcS This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service