January 28, 2016
On January 27, 2016, the Department of the Treasury (Treasury) issued proposed regulations (Proposed Regulations) that provide normal retirement age (NRA) rules tailored to the needs of governmental plans. Governmental plans may, but are not required to, rely on the Proposed Regulations for periods preceding the effective date. If final regulations are more restrictive, the final regulations will be applied without retroactive effect.
Generally, under the Proposed Regulations, if a governmental plan’s NRA does not satisfy one of the new safe harbors listed below, the NRA must satisfy the basic provisions of the 2007 NRA regulations under which the NRA must be an age that is not earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed (based on all the relevant facts and circumstances, with an age 62 safe harbor). Governmental plans that do not permit in-service distributions before age 62 are not required to comply with either the 2007 NRA regulations or any of the safe harbors under the Proposed Regulations.
Further, under the Proposed Regulations, a governmental plan is not required to state an explicit NRA. In the absence of an explicit NRA the plan’s NRA is the earliest age at which the participant has the right to retire without the consent of the employer and to receive unreduced (for age) retirement benefits.
The safe harbors available to all governmental plans under the Proposed Regulations are as follows:
For qualified public safety officers in a plan, additional NRA safe harbors are as follows:
Note that a governmental plan may have different NRAs for various employee groups in the plan, including a different NRA for qualified public safety officers, and may use a “pre-age 65 age-only” NRA safe harbor for qualified public safety officers, but not for other participants.
Comments and requests for a public hearing are due April 26, 2016.
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