Normal Retirement Age vs Early Retirement Age

[imchipbrown]

In the olden days, I used to draft documents with a Normal Retirement age of 65 and 5 (or 10) and Early Retirement age of 55 and 10.

During EGTRRA restatement days, I began moving Normal Retirement Ages down to 59 1/2 for a lot of DC Plans. Now I'm starting PPA restatements and am wondering why I'm defining an Early Retirement Age as a different (lower) age. The document appears to only grant "early retirees" some accelerated vesting.

I'm leaning towards a 59.5 retirement age as both Normal and Early - no distinction.

No real question here. Just looking for some feedback.

[John Feldt ERPA CPC QPA]

Unless you have other provisions tied to the NRA, like allocation condition waivers as an example, or a mandatory distribution at NRA, or an in-service condition based on reaching NRA, then reaching the normal retirement age is only a vesting item. Although it might serve as the testing age for 401(a)(4) purposes, depending on the situation.

If the plan has old money purchase pension accounts, the plan should probably not have a normal retirement age under age 62, but that's a facts and circumstances issue.

If you have DB/DC combo-tested plans, I would recommend having the same NRA in both plans to avoid having to possibly test this BRF issue. Most DB plans do not take the risk of having the NRA under age 62, again, facts and circumstances.

Early retirement is the same as described above, other than the facts and circumstances issue for pension plans. It's not a facts and circumstances issue if the ERA is below age 62 in a pension plan.

[Bird]

I generally don't use an early retirement age any more. It might just accelerate vesting or allow someone to get money a little earlier than in a "termination" but it's not very meaningful. Of course if it's already there we leave it.

[ESOP Guy]

Most DC plans I work with now don't even have an Early Retirement Age. If you get rid of it you might have to check to see if it is a protected benefit or write it such that someone who is ERA now but not NRA doesn't lose something.

[imchipbrown]

On a case by case basis, I'm eliminating the ERA and moving NRA to the former ERA.