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News

Department of Employee Trust Funds
April 19, 2012

IRS Issues Notice on Normal Retirement Age

On April 18, 2012, the federal Internal Revenue Service (IRS) issued a Notice that it is considering guidance regarding the application of its “normal retirement age” final regulation to governmental plans, such as the Wisconsin Retirement System (WRS). The rule was scheduled to be effective January 1, 2013. The IRS Notice is consistent with ETF’s most recent interpretation that the proposed rule will have no effect on normal retirement age levels for any WRS participants.

Specifically, the IRS Notice makes three significant clarifications:

  1. Normal Retirement Age Levels in the Regulation Apply to Plans that Make In-Service Distributions: The Notice clarifies that governmental plans that do not provide for in-service distributions before age 62 will be considered in compliance with the regulation even if the plan does not have an Normal Retirement Age that satisfies the requirements of the 2007 Normal Retirement Age regulations. The WRS does not make in-service distributions, so its Normal Retirement Age levels are not affected by the rule.
  2. Normal Retirement Age Levels for Public Safety Employees can be Lower Even if not Covered by a Separate Plan: The Notice announces an intention to modify the current regulation age-50 safe harbor rule for qualified public safety employees to apply to a group of employees substantially all of whom are qualified public safety employees, whether or not the group of qualified public safety employees are covered by a separate plan. This means that WRS-covered qualified public safety employees will not see an IRS-mandated increase in their normal retirement age because of participation in the WRS.
  3. Extension of the Rule’s Effective Date: The Notice announces an intention to extend the effective date of the regulation to “annuity starting dates that occur in plan years beginning on or after the later of (1) January 1, 2015 or (2) the close of the first regular legislative session of the legislative body with the authority to amend the plan that begins on or after the date that is 3 months after the final regulations are published in the Federal Register.”

The IRS has requested comments by July 30, 2012, regarding the proposed guidance in the Notice. Please continue to monitor this site for further updates.

 

 

 

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