The IRS and Treasury Department recently issued Notice 2012-29, which provides new guidance for the final “normal retirement age” regulations relating to governmental plans. The Notice provides that the IRS and the Treasury intend to further extend the effective date for governmental plans to comply with the final regulations to annuity starting dates that occur in plan years beginning on or after the later of:
- January 1, 2015, or
- 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 three months after the final regulations are published in the Federal Register.
The Notice also provides that the IRS and Treasury will make two important clarifications in the final regulations:
- The final regulations will clarify that governmental plans that do not provide for in-service distributions before age 62 do not have to have a definition of normal retirement age that complies with the final regulations or even define normal retirement age; and
- The final regulations will expand the age-50 safe harbor rule, which currently applies only for plans in which substantially all of the participants are qualified public safety employees, to also apply to a group substantially all of whom are qualified public safety employees. This means that a governmental plan could satisfy the normal retirement age requirement by using a normal retirement age as low as 50 for qualified public safety employees, and a later normal retirement age that otherwise satisfies the requirements in the final regulations for other participants.
Governmental plan sponsors may rely on Notice 2012-29 for the extension until the final normal retirement age regulations are amended. The IRS and Treasury Department are requesting comments by July 30, 2012, relating to this guidance, as well as information on the overall retirement patterns of other employees in government service to assist them in determining the earliest age that is reasonably representative of the typical retirement ages for such employees.