IRS and Treasury Provide Guidance on Usage of Normal Retirement Age in Governmental Plans
July 23, 2012In 2007, the Internal Revenue Service (IRS) and Treasury issued regulations regarding a pension plan's definition of normal retirement age (NRA), which caused considerable concern among governmental plan sponsors. These regulations have been delayed for governmental plans while the agencies consider these concerns. On April 18, 2012 the IRS and Treasury jointly issued a notice stating the agencies intend to amend these 2007 regulations as applied to governmental plans. The contemplated amendments will modify the existing regulations as follows:
- A governmental plan that does not allow in-service distributions before age 62 will no longer be required to have an NRA, or, if it has a definition of NRA, that definition is not required to comply with the regulations.
- There will be a modification of the special rule for public safety workers that, if approved, would no longer require government employers to have separate plans for public safety workers, so long as the group that has the lower NRA is a group of employees who are mostly qualified public safety employees.
Governmental plans can rely on this notice until the NRA regulations are amended. However, the forthcoming guidance will change the effective date for governmental plans to annuity starting dates that occur in plan years beginning on or after the later of January 1, 2015 or the close of the first regular legislative session (of the body with authority to amend the plan) that begins on or after three months after the regulations are published.