In small plans it's common in our firm to use NRA of 55 for those owners with compensation less than the 415(b) dollar limit at age 62 ($180,000) so as to increase the value of the accrual and thereby the funding cost. So the final regs on phased retirement put the onus on the employer to choose an NRA that is "reasonable" in their industry. 62 is a safe-harbor, between 55-62 is a facts and circumstances and the client is on the hook to provide supporting data that something like 55 is reasonable in their industry.

I'm not sure just how concerned to be here. While the Reg deals primarily with in-service (post NRA) distributions and what's a reasonable NRA for that purpose, It also presumably affects funding for those scenarios above. Anyone disagree or see any way around having to use NRA of 62 for funding for small employers who can't easily provide supporting data for an earlier NRA ?

Any thoughts out there as to whether some of the existing plans with NRAs of say 55 will be amending them to say 62 ? It seems in some small industries finding supporting data will be difficult.

For what it's worth, last week Jim Holland commented at the ASPPA Northeast Area Benefits Conference that industry justification would be required for an NRA below 62, however he further indicated the service would not be devoting much resources at this time toward examination of plans with an NRA between 55 and 62.

I have a few plans with an NRA between 55 and 62 as well. I also interested in knowing if these plans require the NRA to be raised to 62.

AT the ASPPA Advanced Actuarial Conference last month in Boston, both Holland and Pippind indicated that the IRS would give great deference to retirement ages of 55 or greater. When asked why they didn't just make 55 a safe harbor, Pippins indicated that it was a safe harbor and that they didn't intend to pursue changes in plans with a NRA between 55 and 62.


That having been said, the reg does not make it a safe harbor. The preamble to the reg says that great deference would be given to a 55 retirement age, but the preamble is not the reg and 10 years from now, will Holland or Pippins have any say over the actions of auditors?

I wanted to resurrect this topic.

Now that some time has passed, does anyone have any further thoughts/comments?

Does anybody see any problems with the following?

NRA - Age 62
ERA - Whatever client wants
Early Retirement Benefit - Accrued Benefit unreduced for early retirement and limited by 415 if needed
Retirement assumption - 100% retire when first eligible

What is reasonable about any of this? Who retires at age 55? Even if the plan has a NRA of 55, does that make it a reasonable ARA for funding? Just a thought.

But Calavera's idea is interesting otherwise. Same reasonable assumption issue though.

How about accruing the lesser of 10% of average comp or the dollar limit each year? Fund 150% of that if you want to be a pig. Take a distribution after 10 years of accruals.

Does it matter what NRA is if you can take a lump sum at the participant's discretion?

We're hoping that this will be discussed more at the EA conference later this month. In spite of the assertion that "great deference" will ge given, I share the concerns that auditors won't necessarily agree.

From a purely objective standpoint, age 55 is mostly crapola anyway. While there are of course exceptions, in our small plan market, the highly educated/highly paid professionals such as doctors, lawyers, accountants, etc., do NOT retire at 55. I think you'd be hard put to find much legitimate data to support such a retirement age in most of these cases. I'm only guessing, but I suspect it is precisely these types of cases that are the reason that 55 was NOT a safe harbor.

Absent more guidance, we'll probably recommend to our clients that they switch to age 62, unless they sign a hold harmless on advice of their legal counsel. And since lawyers generally seem to just HATE to have their clients sign such a hold harmless, I think they will mostly switch to 62 and the problem is solved. Ditto for new plans.

B, that was like a complete game shutout.

Well, that's nice, but I sure don't have 39,000 fans screaming for ME. Actually, I was the only member of my fan club, and even I had to resign.

But last night was fun. I hope Dice-K can revert to mid season form. For all you non-BoSox fans, my apologies for wasting your time, but it IS the playoffs after all. I'll try to keep future playoff observations to the Humor message board...

Andy - wonder what a Monster seat goes for during playoffs, particularly if they meet up with the Yankees?

Are they still playing baseball? Our season generally only lasts until May or so around here. Glad to see someone in this country still cares. Go Tribe!

Did I miss something or were you referring to ASPPPPPA's conference as an "EA conference"?

Yes, I was actually referring to the ASPPA conference. Our EA is the only one here who attends, so we tend to call it the EA conference.

There's an element of Catch-22 here. The feds are saying professionals can't retire at 55 because they don't retire at 55. How many of these folks would retire at 55 if they had been able to stash away a large sum?

Throw in the fact that the limits have changed a bunch of times. Wouldn't TEFRA's slash have affected the number of pros who could afford to retire? Hasn't SBJPA increased this number? Is this number increasing as SBJPA's effect phases in?

Grant that qualified plans may not be the primary factor in retirement decisions, they must have some effect.

I believe the small plan audit cases years ago partially revolved around the same NRA issue (e.g., is 55 or any other low NRA reasonable). I believe the Tax Court and maybe one or more Appeals courts essentially stated the IRS could not control a participant/owner's financial goals if they wanted to set a lower NRA as a target retirement age goal. The courts seemed to feel the IRS was trying to control people's lifestyles indirectly. Maybe these regs empower the IRS more now than before, but the courts seemed sympathetic to the clients causes back then. Of course I realize that few if anys client want to test the issue in court.

My father, a professor of Mathematics at a northeastern university, retired at age 55, and it was quite common to retire at that age. Regardless of income...if the window is appealing enough..they jump through it...especially if they are employable elsewhere and get to start a new 415 limit. This is especially true of attorneys.

....... and DB people around 2012 or so.

retire...run out of work... same thing