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Normal Retirement Age Just 55


austin3515

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Taking over a plamn where NRA is just 55.  Are there any special rules to be aware of?  Is there any way to use an older age for testing?

I've read there are complications with using SSRA in place of NRA.  Any ideas? 

ALSO Does anyone have an extended chart of dispiary factots?  The one I am using (which is from the regs) only spans 60 to 70.  I think the regs say you can use any reasonable method to extend up or down.

Austin Powers, CPA, QPA, ERPA

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I have to credit Andy H with an idea from something like 18 years ago with a post that sounds brilliant.

Quote

I'm not sure I'm following this, but why couldn't you change NRA, keep the prior NRA as an available ERA, and make all optional forms previously available at old NRA available at ERA?

So can I amend the NRA to 65, but provide for a full vesting an Early Retirement Date that is defined to be identical to the existing NRA?  The plan already allows for in-service distributions at the existing NRA, and that would not go away merely because I am changing the Normal Retirement Age. Thus, the participant's benefits are protected, and I get what I want which is to be able to run testing at age 65.

Austin Powers, CPA, QPA, ERPA

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I didn't think you could change retirement age - you told someone he had full retirement at 55 not sure how you can take that away, even if you say "well, early retirement is the same thing"

lets suppose only new entrants have retirement age = 65.

since you would have non-uniform retirement age then the testing age would be the latest age which would be 65. not sure if there is a BRF issue if you did that.

off the top of my head, without looking it up, disparity age 65 generally adds 0.65 and at age 55 only adds 0.55, but that does depend on one's actual soc ret age.

..........

years ago one of lawyers from Corbel indicated the issue with testing on soc sec ret age (even if your document permitted it) is a BRF issue, and would generally fail if you have an HCE with soc sec ret age of 65 as you probably wouldn't have any NHCEs at that age.

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Tom, what happened to the Grinch??  I think you should remain Grinchy until at least the new year...

I asked another well known name in the world of 401k plans, and he told me this would work.  To tell you the truth I can see the logic in it.  There is not one practical benefit that is being cut back.  By the way this is just a DC Plan (not DB) so I presume the MVAR thing doesn;t apply in this circumstance.  I realize this section is just "cross-tested" and not specifically cross-tested defined contribution plans, so I suppose I should have clarfiied that this is not a cash balance plan but rather a 401k/PS Plan...

Austin Powers, CPA, QPA, ERPA

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The doc I have worked on the only benefit of NRA is 100% vesting.  I reviewed that with the attorney's at Corbel long ago and they told me to just preserve the 100% vesting at the prior age and change NRA.  In the conversation you are having with yourself, one of you makes perfect sense to me. 

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55 minutes ago, austin3515 said:

Tom, what happened to the Grinch??  I think you should remain Grinchy until at least the new year...

I asked another well known name in the world of 401k plans, and he told me this would work.  To tell you the truth I can see the logic in it.  There is not one practical benefit that is being cut back.  By the way this is just a DC Plan (not DB) so I presume the MVAR thing doesn;t apply in this circumstance.  I realize this section is just "cross-tested" and not specifically cross-tested defined contribution plans, so I suppose I should have clarfiied that this is not a cash balance plan but rather a 401k/PS Plan...

I could be off base here (have not looked it up and we have no plans that don't use a minimum of 62), but how about adding "or 5 years of participation) to your current age.  You grandfather current folks (you have to) but doesn't that give you a non-uniform age which means you default to 65 for testing?

Lawrence C. Starr, FLMI, CLU, CEBS, CPC, ChFC, EA, ATA, QPFC
President
Qualified Plan Consultants, Inc.
46 Daggett Drive
West Springfield, MA 01089
413-736-2066
larrystarr@qpc-inc.com

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I like the idea, but personally not the indirect nature in which you end up at 65 for testing.  I try to keep things as simple as possible, and if the NRA is 65 in the doc, then I'll know just what to do every time (and more importantly so will everyone in the office).

Austin Powers, CPA, QPA, ERPA

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9 minutes ago, austin3515 said:

I like the idea, but personally not the indirect nature in which you end up at 65 for testing.  I try to keep things as simple as possible, and if the NRA is 65 in the doc, then I'll know just what to do every time (and more importantly so will everyone in the office).

OK, but that has got to be the weakest reason in existence to not use the simplest solution.  The client couldn't care less what is used in testing; I'm guessing you set the admin system specs once and the testing is automatic in the future.  OR, you put a BIG F'in NOTE IN THE FILE if you have to.  Sheesh!

Lawrence C. Starr, FLMI, CLU, CEBS, CPC, ChFC, EA, ATA, QPFC
President
Qualified Plan Consultants, Inc.
46 Daggett Drive
West Springfield, MA 01089
413-736-2066
larrystarr@qpc-inc.com

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You're welcome to use the more complicated approach to get to the same objective.  What you do with your clients is up to you.  I have plenty of BIG NOTES in my clients files by the way, but every one of them was when faced with no alternative.

Keep It Simple Stupid.   Words to live by. 

Austin Powers, CPA, QPA, ERPA

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1 hour ago, austin3515 said:

You've never heard of a dispiary factot before?  What are you taking a high school class in 401k plans or something?

LOL. Yes, it was clear from context for those who already are at Ph.D. level or above.

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1 hour ago, austin3515 said:

You're welcome to use the more complicated approach to get to the same objective.  What you do with your clients is up to you.  I have plenty of BIG NOTES in my clients files by the way, but every one of them was when faced with no alternative.

Keep It Simple Stupid.   Words to live by. 

Good news: we clearly disagree as to which  method is the simple one.  We agree that keep it simple should be the rule.  

Lawrence C. Starr, FLMI, CLU, CEBS, CPC, ChFC, EA, ATA, QPFC
President
Qualified Plan Consultants, Inc.
46 Daggett Drive
West Springfield, MA 01089
413-736-2066
larrystarr@qpc-inc.com

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Related issue (maybe).  Sometimes such low NRA was originally created for one (or a few) participants.  Is that still the case?  If not, maybe the sponsor would like to change it to 60?  62?  65?  If you study the history of early retirement, you may decide that it's no longer useful to encourage it.

Don't forget 411(d)(6).

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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As far as dispiary factots over age 70 I have two different systems on my computer which use the factots at age 70 for all ages 70 and above. No, I won't hang them out to dry by disclosing who they are....

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411d6 is the basis for the question actually. 

I'm sure it was done initially because it helped in testing, I guess it's better for younger HCe's, right?  I noticed that the EBAR's drop down as the NRA drops down.  But now they are all old and merging with a plan that uses age 65.  So I am trying to unify the plan designs with as few special addendums as possible.

Austin Powers, CPA, QPA, ERPA

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9 minutes ago, austin3515 said:


Mike -  I googled it for myself.  This is weird:

"Your search - dispiary factots - did not match any documents."

That's bazaar, the internet must not be working today.

 

dispiary factots.png

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