age 65 factor for later ret. ages

[drakecohen]

Treas. Reg. 1.401(a)(4)-8(b)-(1) seems to allow

use of age 65 factor for those over age 65 in

age-weighted and new. comp. plans.

However, according to some documents

I've seen the factor tables use actual age

maturity value factors after age 65.

Are both methods valid?

Is there a preferred way of doing it?

[AndyH]

I'd like to hear other opinions, but as far as I know both methods are valid for a cross tested plan, but I would suggest using a factor not later than normal retirement age for an age weighed ps plan, because then the actual contribution is affected, not just the test result.

If, for example, NRA is 65, and you use the actual factors, the contribution for a 66 year old would be less than a 65 year old, which is arguably discriminatory.

A safe harbor target benefit plan is required to continue to use the NRA Annuity Rate for people past NRA.

[Tom Poje]

Interesting - I agree you could do either, but (and now I am doing something dangerous - thinking out loud)would probably want to use age 65 to insure an older employee receives the same contribution rate - not necessarily for discrimination purposes - at that age the difference probably wouldn't be enough to fail testing. however, normally an age weighted plan would pass the smoothly increasing acrual rates and so does not have to provide the gateway.

If ee at age 66 is at a lower rate than age 65, then you blow that! or at least it seems to me that would be the case

[Guest greggi39]

does relius use the AA and not 65(or NRA) when testing in 8.x? i am pretty sure it did before 8.x.

[AndyH]

We do age weighed plans on ASC and have to edit the annuity rate tables to make the post-65 annuity rates the same as 65 because that is what our documents call for.

So I would not "rely" on what "relius" spits out.

[drakecohen]

I have been using the age 65 factor for

later ages because it is far easier to program and

the discrimination issue brought up here.

If you have two peope both at RA but

one is 66 and the other is 65 then the 66

year-old would get a lesser percentage

of contribution only because of being

older.

The problem comes with documents

which have tables which recaculate

MV factor at ages over 65. If document

has it then it has to be done that way,

discriminating against older retirees.

[MGB]

Although this discussion has focused on nondiscrimination in the context of HCE/NHCE, why wouldn't the lower allocations post-65 be age discriminatory and illegal under 411(b)(1)(H)(2)(A)?

[drakecohen]

I think the lower rate for post 65 would

be discriminatory and any participant

over age 65 getting lower allocations

might be able to sue.

But what I'd be curious about is how

many documents are written this way.