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There is a lot of information out there about what a permissible Normal Retirement Age is.  IRC 411(a)(8) says that a plan cannot have a NRA later than 65 & 5.

The plan I am looking at has a NRD that is the last day of the plan year (December 31) in which 65 & 5 is met.  So, for someone born on January 1, the NRD would basically almost be age 66 for them.

Typically, plans define NRD as the first of the month coincident with the attainment of NRA.  This has the same issue as the one noted above, in that someone born on the 2nd day of the month would have a NRD that is almost at age 65 1/12 and someone born on the first day of the month, the NRD would be 65.  But this doesn't feel as unfair as the example above, where the NRD is practically at age 66.

What restrictions are there on NRD?  This might be a dumb question, but I've never had to think much about it since all the plans I've seen before have a NRD that is close to NRA.  

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This is really an interesting question.  I thought it would be a simple answer, but after digging, I don't see any real definition of Normal Retirement Date in any regulations.  Yes, it is most common to say the NRD is the first of the month following NRA, but I did see something in the Pension Distribution Answer Book that said first day of the plan year following NRA was acceptable.  Regardless of the relationship between NRA and NRD, RR 81-211 is clear that the participant must be 100% vested as of NRA. 

The 411 Regs also require a suspension of benefits notice or an actuarial increase if a participants benefits are delayed beyond Normal Retirement Age, therefore,  in your situation,  if benefits aren't paid until NRD, you might need to provide a suspension of benefits notice or an actuarial increase.

I would definitely talk to the person who drafted the document and get their opinion.

The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice.

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My recollection is that the Code says that NRD is the earlier of the date in the Plan or the later of 65 and the 5th anniversary of participation.    But as part of the restatement process, FIS is telling us that the IRS required their VS plans to define NRD as not later than an age plus the first day of the plan year that contains the 5th anniversary of participation.

But either way, the end of the plan year of 65+5P does not fly.

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I'm thinking NRD is just a plan concept, not a statutory concept.  All this is speculation based on the fact that me and Effen can't really find any regulations that go into the limitations of NRD.

What I mean by this is that periodic payments are supposed to be made to each participant commencing on their NRA (not NRD).  "Periodic" typically means monthly payments, but some plans make do make quarterly payments.  Instead of cutting checks every single day due to each person being born on a different day of the month, the NRD concept of the first of the month makes things administratively simpler by just having checks processed once a month.  

Also, as stated above, typically plans have a "stability period" (I'm stealing this term) of one month for the NRD (first of the MONTH).  Would a stability period of one year fly?  I'm not sure.  But perhaps if the stability period is one year, the participant should get back payments or an actuarial increase from the NRA to the NRD (age 65 to almost age 66).

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2 hours ago, AndyH said:

My recollection is that the Code says that NRD is the earlier of the date in the Plan or the later of 65 and the 5th anniversary of participation.    But as part of the restatement process, FIS is telling us that the IRS required their VS plans to define NRD as not later than an age plus the first day of the plan year that contains the 5th anniversary of participation.

This is actully related to NRA and not NRD (see 1.411(a)-7(b))

 

19 minutes ago, toohot4tv said:

What I mean by this is that periodic payments are supposed to be made to each participant commencing on their NRA (not NRD)

I think it is the opposite. On NRA, a participant has to be 100% vested, but it doesn't have to get 100% of his benefit. For example NRA could be 65, NRD = Social Security Retirement Age, and an early retirement reduction would apply from NRD to NRA.

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You may find this to be helpful. It’s part of the definition of Uniform Normal Retirement Age from the definition section of the 401(a)(4) regs. 1.401(a)(4)-12. 

(4)
 Conversion of normal retirement age to normal retirement date. A group of employees does not fail to have a  uniform normal retirement age merely because a  defined benefit plan provides for the commencement of  normal retirement benefits on different retirement dates for different  employees if each employee's normal retirement date is determined on a reasonable basis with reference to an otherwise  uniform normal retirement age and the difference between the normal retirement date and the  uniform normal retirement age cannot exceed six months for any employee. Thus, for example,  benefits under a plan do not fail to commence at a  uniform normal retirement age of age 62 for purposes of § 1.401(a)(4)-3(b)(2)(i), merely because the  plan's normal retirement date is  defined as the last day of the  plan yearnearest attainment of age 62.

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On ‎2‎/‎20‎/‎2020 at 1:23 PM, Calavera said:

This is actully related to NRA and not NRD (see 1.411(a)-7(b))

 

I think it is the opposite. On NRA, a participant has to be 100% vested, but it doesn't have to get 100% of his benefit. For example NRA could be 65, NRD = Social Security Retirement Age, and an early retirement reduction would apply from NRD to NRA.

Finally had a minute to look this up.  NRA is the age that the accrued benefit is payable at.   Code Section 411(a)(7) (A)(i).   And it cannot be greater than 65+5P.   Regulation 1.411(a)-7(b) appears to me to be outdated.  It says for example, that 10P is ok.

I think Effen is right (as usual).  I'm not seeing how that translates to NRD.  It implies to me (as Effen said) that there would need to be an actuarial increase (or SOB) if NRD is later than NRA but I'm not seeing anything clear on this.

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