The employee retirement plan adopted by BT Corporation provides that the total amount of retirement benefits provided to a particular employee under the plan can be reduced by the amount of any social security benefits to which that employee is entitled.Because this provision of the plan discriminates in favor of the highly compensated employees of BT, the retirement plan cannot be "qualified" for Federal tax purposes.

Question

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The provision described does not inherently discriminate in favor of highly compensated employees. A retirement plan's qualification for federal tax purposes is primarily determined by its adherence to the Internal Revenue Code requirements, which include numerous non-discrimination rules. However, integrating retirement benefits with social security benefits, by itself, does not automatically disqualify a plan. The key is whether the plan benefits disproportionately favor highly compensated employees in ways not allowed by tax laws, which is not clearly indicated by the integration with social security benefits alone.

The Employee Retirement Plan Adopted by BT Corporation Provides That