Normal Retirement Age

[John Feldt ERPA CPC QPA]

A Form 5310 was filed for a DB plan with a plan termination date of Feb 29, 2008. Normal retirement Age is 58 (or 5 years if later). Plan Year end 12/31.

The IRS reviewer asks:

"Please demonstrate that the plan's definition of normal retirement age satisfies Regulation 1.401(a)-1(b)(2). Or, alternatively, amend the plan's definition of normal retirement age."

We understand that under 1.401(a)-1(b)(2), the Normal retirement age must not be earlier than the earliest age that is reasonably representative of the typical retirement age for the industry. But, (iii) states that in the case of a normal retirement age that is not earlier than age 55 and is earlier than age 62, whether the age is not earlier than the earliest age that is reasonably representative of the typical retirement age for the industry is based on all of the relevant facts and circumstances.

Does anyone have insight regarding what the IRS will consider in this "relevant facts and circumstances".

The employer is a PC that does dermatology work.

Alternatively, if we amend the plan now to have the NRA become 62 with an unreduced ERB at age 58, would that cause the IRS to invalidate any prior actuarial valuations that calculated the plan's contributions?

Not sure what to do with this one - any comments appreciated.

[Andy the Actuary]

You can likely find industry statistics (e.g., from the AMA) but you may not like the results. How we've handled this is to actuarially increase the factors in the formula so that we have a wash.

[Blinky the 3-eyed Fish]

A change in the plan's NRA will not cause the invalidation of prior valuations. It's perfectly fine to assume a different retirement age for the valuation than what's stated in the plan document.

[David MacLennan]

Why don't you just prepare the amendment? Under Notice 2007-69, the effective date would be Jan 1 2009. The amendment shouldn't have any impact on the plan.

You might even be able to argue no amendment is necessary, since the plan term date is pre-effective date. IRS reviewer might argue that the relief does not apply to terminating plans.

[John Feldt ERPA CPC QPA]

Thanks very much.

I agree that the temporary relief allows the plan to delay the effective date of this regulation to the first day of the first plan year starting after June 30, 2008. I will attempt to argue first that the regulation's effective date (under Notice 2007-69) is after the plan termination date and therefore does not affect the plan. If that fails, then we'll just do the amendment with a 1-1-2009 effective date.