Tax News

CCH (cch.taxgroup.com) reports:

The IRS has provided temporary relief, until the first day of the first plan year that begins after June 30, 2008, for certain pension plans under which the definition of normal retirement age may be required to be changed to comply with the regulations that were recently issued under Code Sec. 401(a). Potential violations of the vesting and accrued benefit requirements for defined benefit plans under Code Sec. 411 that may arise from a definition of normal retirement age based on a minimum period of service are also identified. Comments are requested from sponsors of governmental plans as defined in Code Sec. 414(d) and other plans not subject to the requirements of Code Sec. 411 on whether such a plan may define normal retirement age based on years of service.
On May 22, 2007, final regulations on distributions from a pension plan upon attainment of normal retirement age were published (T.D. 9325, TAXDAY, 2007/05/22, I.1). The 2007 regulations modified Reg. §1.401(a)-1, which generally requires a pension plan to be maintained primarily to provide systematically for the payment of definitely determinable benefits after retirement, by adding in part new paragraphs (b)(2), (3) and (4).
Some plan sponsors expressed concern that, although they believe they will be able to demonstrate that their plan's definition of normal retirement age of less than age 55 satisfies the requirements of the 2007 regulations, until they receive a determination to that effect from the IRS, the presumption under the regulations that the plan does not satisfy those requirements creates uncertainty.
Relief Provided
Two forms of relief are provided and are available to plans that meet the eligibility requirements and that might otherwise be required to be amended to raise the plan's normal retirement age effective before the first day of the first plan year beginning after June 30, 2008, in order to satisfy the 2007 regulations. The relief does not apply to governmental plans, but it does apply to a plan maintained pursuant to one or more collective bargaining agreements that have been ratified and are in effect on May 22, 2007, if the first plan year beginning after the last of the agreements terminates (determined without regard to any extension thereof) begins before July 1, 2008.
Application Procedures
An application for a letter ruling as to whether a plan's normal retirement age reasonably represents the typical retirement age for the industry in which the covered workforce is employed is to be made in accordance with the procedures governing letter rulings requests in Rev. Proc. 2007-4, 2007-1 I.R.B. 118. The request must include the user fee for a letter ruling under section 6.01(10) of Rev. Proc. 2007-8, 2007-1 I.R.B. 230.
Rev. Proc. 2007-4, 2007-1 I.R.B. 118 and Notice 2007-3, I.R.B. 2007-2 are modified.
Request for Comments
Sponsors of governmental plans and other plans not subject to the requirements of Code Sec. 411 are asked to submit comments on whether normal retirement age under such a plan may be based on years of service. Comments are requested on whether and how a pension plan with a normal retirement age conditioned on the completion of a stated number of years of service satisfies the requirement in Reg. §1.401(a)-1(b)(1)(i) that a pension plan be maintained primarily to provide for the payment of definitely determinable benefits after retirement or attainment of normal retirement age and how such a plan satisfies the pre-ERISA vesting rules. Comments should be submitted by Nov. 25, 2007.
Notice 2007-69, 2007FED ¶46,581
Other References:
Code Sec. 401
CCH Reference - 2007FED ¶17,507.041
CCH Reference - 2007FED ¶17,507.042
CCH Reference - 2007FED ¶17,507.2531
CCH Reference - 2007FED ¶17,929.024
CCH Reference - 2007FED ¶17,929.06
Code Sec. 411
CCH Reference - 2007FED ¶19,076.96
Code Sec. 414
CCH Reference - 2007FED ¶19,156D.021
CCH Reference - 2007FED ¶19,156D.28
Tax Research Consultant
CCH Reference - TRC EXEMPT: 12,054
CCH Reference - TRC EXEMPT: 12,102
CCH Reference - TRC EXEMPT: 21,110
CCH Reference - TRC EXEMPT: 21,162
CCH Reference - TRC EXEMPT: 33,150
CCH Reference - TRC EXEMPT: 33,200
CCH Reference - TRC INDIV: 51,366.05
CCH Reference - TRC IRS: 12,230.10
CCH Reference - TRC IRS: 12,230.15
CCH Reference - TRC IRS: 12,230.20
CCH Reference - TRC IRS: 12,230.40
CCH Reference - TRC IRS: 12,304
CCH Reference - TRC RETIRE: 42,454
CCH Reference - TRC RETIRE: 51,050
CCH Reference - TRC RETIRE: 51,052.05
CCH Reference - TRC RETIRE: 51,052.20
CCH Reference - TRC RETIRE: 51,054
CCH Reference - TRC RETIRE: 51,100
CCH Reference - TRC RETIRE: 69,352