Can plan be amended to raise the normal retirement age? Applies only t

[John A]

A 401(k) plan would like to raise the Normal Retirement Age from 60 to 65. I would think that any current participant would have to retain the age 60 NRA. Can the plan change to 65 for new participants?

[Dowist]

I think the proper analysis is to look at the change as a change in the vesting schedule and also possibly a change in the forms of payment available under the plan.

To change a vesting schedules you have to give every participant who could be adversely affected who has 3 years of service the option to choose the old schedule. So practically this means you'd have to at a minimum not change the NRD for any participant who has 3 years of service. (And this may be the end of your inquiry, because most employers would not want to have a different NRD for participants with 3 years vs. those with less - more likely it would go with your thought, which would be to grandfather everyone). Code ss 411(a)(10)

The other thing a NRD does is establish when payments can be made - for example, if your plan said that you could withdraw your account at NRD, you'd have to protect the right of participants who are there now to withdraw their accounts at 60.

[Guest]

I think the '3 year rule' only applies to vesting, at least I don't recall it being mentioned in regards to retirement age.

Thus, you can certainly change retirement age, but I thought that the change only applied to new entrants. (I know the software I use will never change a person's retirement date and make it worse - if there was an amendment to change the retirement to a later date.)

[david rigby]

I agree with Tom. The 3-year rule applies to a change in vesting schedule. It is Sec. 411(d)(6) that would provide guidance on a change in NRA, with the net effect that any EE who is a participant at the date of change should not see his/her NRA increased with respect to benefits already accrued.

Note that NRA is not the same as NRD. The former is the date at which 100% vesting must occur without regard to service. That is why ii is part of the statutory definition of minimum vesting requriements. See sec. 411(a)(8).

NRD is the point at which the benefit is payable. (Yes, that is an oversimplification.)

[Guest Beth N]

My client has a 401(k) plan that has accumulated several different normal retirement dates. Under the new 411(d)(6) regs can we eliminate them?

[Kirk Maldonado]

I disagree with Tom and PAX.

Participants become fully vested at normal retirement age, regardless of their years of service. If postponing normal retirement age is not a change in the vesting schedule (at least for people hired after age 60), I don't know what would qualify as an amendment

[Wessex]

I agree with Kirk and Dowist that a change in the NRA is a change in the vesting schedule. The second paragraph of pax's post in essence says that, although he has reached a different conclusion.

[AndyH]

I'm not sure I'm following this, but why couldn't you change NRA, keep the prior NRA as an available ERA, and make all optional forms previously available at old NRA available at ERA?

Could be an issue with a pension plan that provided in-service withdrawals available at old NRA, but I don't see any other problems. Vesting and all options would be protected.

[Guest PAUL DUGAN]

I think you may have a discrimination problem. If all the highly compensated EE's have a retirement age of 60 and you end up with most Non-high's having an age 65 retirement age.

[david rigby]

NRA has some very important characteristics. For example, in any qualified plan, it is the point of vesting without regard to service. ERA won't (necessarily) do that. Also, in a DB plan, it is the point in time at which a topheavy minimum benefit is defined. Likely also, the plan defines actuarial equivalence based on the normal form of payment at NRA.

Notwithstanding the comments by Kirk and Wessex, I still believe that the definition of NRA is not part of the vesting schedule. However, this is probably semantics. I believe that 411(d)(6) will require that the NRA be "protected" for those who are participants, at least with respect to current accruals.