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August 19, 2007 at 04:00 PM
The Internal Revenue Service is giving pension plan sponsors more time to comply with new regulations that affect when participants can begin collecting benefits.
The relief, described in IRS Notice 2007-69, will help employers implement a final normal retirement age rule published in May 2007.
The new final rule creates a “safe harbor” for employers that set a plan’s normal retirement age anywhere from age 62 to 65, and the rule states that the IRS will defer to the judgment of an employer that finds that a normal retirement age ranging from 55 to 62 is typical for employers in its industry.
The notice affects manufacturers, construction companies and other employers that want to establish a normal retirement age that is earlier than age 55.
In the notice, IRS officials explain how an employer can apply for an IRS “letter ruling” approving use of an unusually low normal retirement age.
The request for a letter ruling must describe the employer’s industry, and it must present and analyze the data the employer used to determine the typical retirement age for its workers, IRS officials write in the notice.
The notice also explains how an employer can use an unusually low normal retirement age while applying for formal IRS approval of the unusually low normal retirement age.
“If the service determines during the ruling process that the plan’s normal retirement age does not reasonably represent the typical retirement age for the industry in which the covered workforce is employed, the service will require corrective action to be taken prospectively only from the date of issuance of the ruling letter, so that the plan’s normal retirement age will not be required to be raised retroactively,” officials write.
A plan is eligible for temporary relief from the new normal retirement age regulations if it used a normal retirement age below 55 before May 22, 2007 and if no possible plan participant hired at age 18 or older could attain the plan’s normal retirement age before the age of 40, officials write.
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