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The IRS recently issued regulations which provided new rules for what is an acceptable definition of "Normal Retirement Age". These regulations are applicable only to pension plans (defined benefit plans and money purchase plans) and not to profit sharing or 401(k) plans. Every retirement plan defines the Normal Retirement Age in its written plan document. Most plans are expected to comply with these new regulations no later than January 1, 2009. Any plan amendments necessary to comply with the new regulations would need to be adopted by December 31, 2009 and made effective as of January 1, 2009. However, plans with plan years other than a calendar year (1/1 - 12/31) will need to comply as early as July 1, 2008.

The IRS has identified the following rules for an acceptable definition of a plan's retirement age (Normal Retirement Age):

Age 62 or higher -   A retirement age of at least age 62 is automatically acceptable. This is deemed a safe harbor definition of normal retirement age.

Age 55 to Age 62 -   A retirement age in this range is acceptable if it is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed. This determination is based on relevant facts and circumstances.

Below Age 55 -   A retirement age below age 55 is deemed by the IRS to be unacceptable unless the Commissioner of IRS determines otherwise under specific request for determination made by the plan. Innovative Pension has not administered nor supported any plans with retirement ages less than age 55.

If your plan's Normal Retirement Age is defined as age 62 or higher your plan meets the IRS safe harbor and no further determination is necessary.

If your plan's Normal Retirement age is below age 62 you must make a determination as to whether your plan's definition of retirement age is typical for your business' industry or practice. If your plan is examined by IRS or Department of Labor they may request that you provide them with your relevant facts to support your plan's definition of Normal Retirement Age.

If you determine you cannot support your plan's retirement age under these new regulations you will need to amend your plan's retirement age to an age acceptable under these new regulations. Your amendment must be adopted no later than the last day of the plan year beginning after June 30, 2008 and effective as of the beginning of such plan year. For a calendar year plan ending 12/31 your amendment must be adopted by December 31, 2009 and effective January 1, 2009. A plan with a year ending 6/30 will need to adopt the amendment earlier: effective as of July 1, 2008.

Please note that for a defined benefit plan a change in the definition of Normal Retirement Age will also change the size of the plan's contribution required to be deposited.

We encourage you to contact us if your plan's definition of Normal Retirement Age is less than age 62 to discuss the impact of these new regulations to your plan. You will either need to amend your plan's definition or provide documentation supporting a lower retirement age based on the standards of your industry or profession. If you need additional information regarding these new regulations please give us a call.

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