In May, 2007, the IRS informed all employers that any qualified retirement plans that had a normal retirement age (NRA) earlier than age 55 (with the exception of public safety officers, where an age of 50 was permitted) were automatically deemed as not meeting the requirements in the Tax Code.  If a plan had an NRA between 55 and 62 it had to prove that such an age met an “industry standard,” a very high burden of proof in most industries and even in the public sector.

This created two problems for many governmental employers.  First, many had normal retirement age provisions less than age 62.  Second, many such employers also often had a years-of-service provision that enabled participants to retire long prior to age 62.  For example, you could often find a 25-and-out provision with full benefits in many governmental (and private sector) plans.

Later in 2007, nongovernmental employers were told in IRS Notice 2007-69 that they had to have updated NRA provisions in their plan for any plan year beginning on or after July 1, 2008.  For most plans, that meant for plan years beginning on January 1, 2009 (calendar year plans).  Governmental employers were given an additional two years to comply (plan years beginning January 1, 2011).

However, with yesterday’s new IRS Notice, governmental employers now have another additional two years until January 1, 2013 to fix both of these problems.

If only nongovernmental employers had the same relaxed provisions…