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October 15, 2008 Proposed IRS Retirement Rule Change Deferred Recently, the IRS extended its definition of acceptable retirement age to all defined benefit plans, including governmental plans. The regulations state that normal retirement age under a plan must be an age that is “not earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed.” For most workers, a normal retirement age that falls between ages 55 and 62 would meet the new IRS standard. The IRS has made an exception for plans where the majority of the plan participants are qualified public safety employees. For such plans, a normal retirement age of 50 or later would be qualified under the new standard. Given that some of our members retire younger, even that change did not go far enough. NAPO, of which the PBA is a member, has been working with Congress and other public sector organizations to delay or rescind these regulations since the IRS published the proposed rule. In April of this year, NAPO and 18 other stakeholder organizations filed a letter to formally request an extension of the effective date. On October 10, 2008, the IRS issued Notice 2008-98, which provides that the IRS and Treasury intend to amend the normal retirement age regulations to change the effective date for governmental plans to plan years beginning on or after January 1, 2011. By delaying the effective date, the IRS would give state and local governments and organizations representing public sector employees the chance to respond and provide guidance in regards to an acceptable definition of normal retirement age for police officers, as opposed to other public and private sector employees. Obviously, we are taking this issue seriously and will do everything we need to do to stop it. But when one looks at the issue, you can see many potential challenges with it from a legal standpoint. If the IRS ultimately intends to proceed with this regulation, we will mount a legal challenge. So, at this juncture, I do not want to convey the impression that this is imminent and that it has a great likelihood of being upheld in its current form. We will continue working with other local, state and national groups to coordinate strategies and will keep you advised as the issue and our response develops.
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