According to Notice 2008-98 , under the extension, the2007 final regulations will be effective for a governmental plan (as defined in Â§ 414(d) of the Internal Revenue Code) for plan years beginning on or after January 1, 2011.
The IRS explained that prior to being amended by the 2007 final regulations, Â§ 1.401(a)-1(b)(1)(i) of the Income Tax Regulations required a pension plan to be maintained primarily to provide systematically for the payment of definitely determinable benefits after retirement. The 2007 final regulations amended Â§ 1.401(a)-1(b)(1)(i) to provide an exception to that rule by permitting a pension plan to commence payment of retirement benefits to a participant after the participant has attained normal retirement age even if the participant has not yet had a severance from employment with the employer maintaining the plan (See IRS Releases Final Rules on In-service Distributions Past Retirement Age ).
The 2007 final regulations also require a pension plan’s normal retirement age to 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.
The regulations are generally effective May 22, 2007, with a later effective date for governmental plans and certain collectively bargained plans. However, Notice 2007-69 provided temporary relief for certain plans that may have to change their definition of normal retirement age to satisfy the new rules (See IRS Lends Helping Hand on Plan Retirement Age Changes ).
One trade group for government plans applauded the IRS move.
“We are pleased that IRS and Treasury recognized the burden the proposed final regulations would have had on the public plan community and are thankful that they granted our request for an extension,” said Hank Kim, executive director of National Conference on Public Employee Retirement Systems (NCPERS), in a statement. “This move will certainly alleviate a lot of confusion and unintended administrative burdens. We will be working with the IRS and Treasury over the next two years to ensure that such confusion and administrative difficulties are not repeated.”
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