Simplify to just 70 1/2 for all employees

[Oh so SIMPLE]

A plan has provision that the required beginning date is age 70 1/2, or if a non-owner for past five years, when actually terminate employment if later.

May this be amended to simply be age 70 1/2 for all employees, without being a cutback of a protected benefit, right or feature?

[My 2 cents]

Is such a thing permissible under age discrimination laws? It is one thing to force benefit receipt, based on age, when there are laws mandating it, but another thing entirely when there are not. My vote is for not doing it.

[J Simmons]

I do not see an age discrimination issue. Those affected before such a change were all older, not under age 40. Those affected after such change will be old and young alike, not favoring those under age 40 at the expense of those 40 or older. Whenever an employee does in fact reach age 70½, the change would affect him or her.

[QDROphile]

Time of benefit payment is protected. The amendment could cause some particpants to be paid involuntarily earlier than the current terms.

I used to think the age 70 1/2 rules were statutory requirements, not "benefits" of plan design. We learned that the IRS thinks otherwise some years ago when the rules were changed. The IRS gave some transition rules to provide some practical relief.

[Oh so SIMPLE]

Time of benefit payment is protected. The amendment could cause some particpants to be paid involuntarily earlier than the current terms.

I used to think the age 70 1/2 rules were statutory requirements, not "benefits" of plan design. We learned that the IRS thinks otherwise some years ago when the rules were changed. The IRS gave some transition rules to provide some practical relief.

Since an employee would yet have a lump sum payout at NRA of equivalent amount, cannot the form of a later payout (after April 1 after calendar year of reaching age 70 1/2 if yet working and not an owner in prior 5 years) be eliminated?

[GMK]

It's the timing, not the form, of the later payout that's at issue.

For example, where we offer participants the choice to start RMD's at 70-1/2 or defer them while still employed, almost all employees defer their RMDs. They have income now and don't want to use up plan funds before they retire. I think that the biggest advantage most (not all) of them see in deferring RMDs is that their tax rate on the RMDs will be less after they retire than while they are still employed.

So, if we took away the 'no RMDs until you terminate (after age 70-1/2)' option, our people would see it as a benefit reduction.