NRA age 50

[Dalai Pookah]

Takeover. Many issues. DB with document stating NRA age 50. This would violate §401(a)(14) and §1.401(a)-1(b)(2). We can correct late restatements under SCP, but can we also change the NRA to 62 under SCP as well? This appears to me to be a document issue, which cannot be corrected under SCP. Thoughts?

Also, assuming we have to do this from inception, would we also have to redo the actuarial valuations using the correct NRA (likely resulting in some past non-deductible contributions) or just look at open years?

[Belgarath]

The DB experts here will give you much better advice, but I'll toss in a thought, going from memory WAAAY back. I do seem to recall that it was possible to have a NRA earlier than age 62. I believe a determination letter is required for this, and there would obviously need to be pretty solid evidence that the age chosen was representative of the industry. Just for example, I think it is likely that the IRS would approve such an age if the plan was sponsored by a professional sports team. Probably a stupid example, but you get the idea. Likely this is not the case in your situation, but I think it is at least possible.

[Lou S.]

Restate to age 62 NRA, provide fully subsidized ERA benefit at age 50? Fund for the fully subsidized benefit assuming 100% or participants will opt for it? Just a couple thoughts that may help with the prior valuation issues.

I seem to recall doing something similar when we had to raise the NRA of a few plans when the IRS came out with the age 62 as reasonable but that was some time ago. Not sure I've seen a document with a pre 62 NRA in some time. Don't know if it is SCP correctable or requires VCP.

[Dalai Pookah]

That makes sense to me Lou. I don't know if it is SCP or VCP, so that question still exists. NRA62 with fully subsidized ERA would solve funding and if we don't otherwise have any VCP issues I might take the position that it is SCP correctible operation issue.

[Luke Bailey]

Even though age 50 is potentially disqualifying, if you amend to 62 isn't that a benefit cutback, so VCP required? I guess if the fully subsidized ERA comes out to be the same benefit amount, arguably not.

[CuseFan]

19 hours ago, Luke Bailey said:

isn't that a benefit cutback

There was cutback relief from upping NRA to 62 for a couple of years after that was enacted, but that was quite a while ago now so I agree it would be a cutback and think a VCP would be needed in this situation. Accrued benefits and funding were never the issue for artificially low NRAs, it was a situation where NDT could be manipulated and/or participants could get in-service NRA distributions very early. A successful VCP application on this might be contingent upon neither of those IRS-perceived abuses occurring in that plan.