Amend NRA from 65 to 62 to accommodate in-service distribution?

[Guest Dave Peckham]

Single-employee corporate plan sponsor adopted DB plan effective January 1, 2002. In 2009 his S-corporation will have no income and lots of expenses. In 2010, his corporate income will be high once again. He would like to take an in-service distribution before 12/31/09 to offset the S-corp loss that will flow through to his personal return.

Now, Mike Preston has already warned us that taking an in-service distribution requires a 1/1/09 AFTAP of 110%. No problem, that requirement is met.

My question is whether there is any problem amending the NRA from age 65 and five years of participation to age 62 and five years of participation. The client's DOB is 5/3/1947, so he is 62 now and has 7 years of participation.

[david rigby]

Check the pre-NRA (as early as 62) portion of IRC as added by PPA.

IRC 401(a)(36).

[Blinky the 3-eyed Fish]

If the owner is the only plan participant, the plan only covers HCEs and the 110% threshold is not an issue. After all the top-25 restrictions are found in (a)(4), so if you have a plan that covers no NHCEs, there is no possibility of discrimination. As always, your plan document must not restrict anything artificially.

No problems with an age 62+ in-service distribution.

[david rigby]

No problems with an age 62+ in-service distribution.

... after the proposed amendment is adopted ...