Proposed Guidance Would Clarify How Normal Retirement Age Regulations Impact Governmental Pension Pl Proposed Guidance Would Clarify How Normal Retirement Age Regulations Impact Governmental Pension Pl

Proposed Guidance Would Clarify How Normal Retirement Age Regulations Impact Governmental Pension Plans

The IRS and Treasury Department issued Notice 2012-29 on April 18, 2012, to announce they are currently considering guidance regarding the applicability of the final "normal retirement age" regulations to governmental plans. The final regulations issued in 2007 require a pension plan's normal retirement age to be age 62 or older (but not lower than age 55 generally, or age 50 for public safety employees). The effective date for governmental plans to comply with the final regulations was extended on three occasions. Most recently, Notice 2009-86 specified that the final regulations apply to plan years beginning on or after Jan. 1, 2013.
 
The IRS and Treasury Department now intend to modify the final regulations with respect to governmental plans to make two important clarifications. First, the final regulations would be revised to clarify that a governmental pension plan that does not provide payment for in-service distributions before age 62 will not fail to satisfy the requirements of the final regulations just because the pension plan does not define normal retirement age or does not have a definition for normal retirement age that satisfies the requirements of the final regulations. Second, the revisions to the final regulations would clarify that the age-50 safe harbor rule for qualified public safety employees that deems age 50 or later to be a normal retirement age will apply to a group of employees substantially all of whom are qualified public safety employees, regardless of whether that group of employees are covered by a separate plan. This means, as noted in an example in the Notice, a governmental pension plan could satisfy the requirements of the final regulations using a normal retirement age of 50 for a group made up mostly of public safety employees, and a later normal retirement age that otherwise satisfies the requirements of the final regulations for other participants.
 
The IRS and Treasury Department also intend to modify the final regulations to further extend the effective date for governmental plans to comply with the final regulations to the later of: (1) Jan. 1, 2015, or (2) the close of the first regular legislative session beginning on or after the date that is three months after the final regulations are amended.
 
The IRS and Treasury Department are requesting comments about this guidance, particularly with respect to the age-50 rule for qualified public safety employees. This includes comments on whether an additional rule is necessary that allows retirement after 20 to 30 years of service to be a normal retirement for public safety employees, and whether there are other groups of governmental employees similar to public safety employees that should have a similar rule. The IRS and Treasury would also like information on the overall retirement patterns of other governmental employees to help them determine the earliest age that is reasonably representative of the typical retirement ages for such employees.
 
Written comments on the proposed guidance are due July 30, 2012, and may be (1) mailed to CC:PA:LPD:PR, (Notice 2012-29), Room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, D.C. 20044; (2) hand-delivered to Internal Revenue Service, CC:PA:LPD:PR, (Notice 2012-29), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, D.C.; or (3) submitted via the Internet at notice.comments@irscounsel.treas.gov (Notice 2012-29).
 
If you have any questions or need additional information regarding the proposed guidance and how it may impact your governmental plan, please contact Mary Beth BraitmanLisa Harrison or any member of the Ice Miller Employee Benefits Group.
 
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.
 
 

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