Why is the Normal
Retirement Age in defined benefit plans, like ours, usually age 65? Can we
change our Normal Retirement Age?
– Nancy C., Berkeley
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A
defined benefit plan’s
Normal Retirement Age (NRA) has been under discussion for many years. While the
latter of age 65 or the fifth anniversary of plan participation is the
generally accepted NRA, in 1971 the IRS said the NRA could be lower than 65 if
a lower age is customary in a particular company or industry. Then, in 1978,
the particular company or industry requirement was dropped, allowing all
covered plans to have a lower NRA.
The NRA changed back
under new IRS regulations that were finalized in May 2007. Now, as before, a
qualified plan must provide benefits after retirement or the attainment of the
NRA. The NRA is defined as 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.” It is unclear why the
industry standard language, dropped in 1978, has been reintroduced.