kocak Posted September 11, 1999 Posted September 11, 1999 Are there any good reasons to have an early retirement option in a defined contribution plan?
Kirk Maldonado Posted September 12, 1999 Posted September 12, 1999 No. They only make sense in a defined benefit plan. Kirk Maldonado
MWeddell Posted September 14, 1999 Posted September 14, 1999 Agreed, there's nothing to be gained by having an early retirement provision in a defined contribution plan. The cash out consent regulations gives one a slight incentive to set normal retirement age at age 62 for plan sponsors who can't stand to administer benefits belonging to former employees and who believe that their cost of fully vesting employees at age 62 (instead of age 65 let's say) is insignificant. This is a bit different from your question, but thought it was close enough that I'd mention it.
Guest Dook Posted September 14, 1999 Posted September 14, 1999 In virtually all cases these provisions are hold-overs from the days when vesting schedules could be longer OR, to avoid the 10% premature withdrawal penalty, the participant not only had to be age 55 and separate from service, but also the separation had to meet the requirements of the plan's early retirement provision. The rules now only require that the participant be age 55 when they separate from service. Document preparers have kept the language in just because it is easier, and will cover the few remaining plans that have an early retirement provision more generous than their vesting schedules.
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