[Federal Register Volume 81, Number 17 (Wednesday, January 27, 2016)]
[Proposed Rules]
[Pages 4599-4605]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-01639]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-147310-12]
RIN-1545-BM22


Applicability of Normal Retirement Age Regulations to 
Governmental Pension Plans

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document contains proposed regulations under section 
401(a) of the Internal Revenue Code (Code). These regulations would 
provide rules relating to the determination of whether the normal 
retirement age under a governmental plan (within the meaning of section 
414(d) of the Code) that is a pension plan satisfies the requirements 
of section 401(a) and whether the payment of definitely determinable 
benefits that commence at the plan's normal retirement age satisfies 
these requirements. These regulations would affect sponsors and 
administrators of governmental pension plans, as well as participants 
in such plans.

DATES: Comments and requests for a public hearing must be received by 
April 26, 2016.

ADDRESSES: Send submissions to CC:PA:LPD:PR (REG-147310-12), Room 5205, 
Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
147310-12), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue NW., Washington, DC 20224, or sent electronically via the 
Federal eRulemaking Portal at www.regulations.gov (IRS REG-147310-12).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Pamela Kinard at (202) 317-4148 or Robert Walsh at (202) 317-4102; 
concerning the submission of comments or to request a public hearing, 
Oluwafunmilayo (Funmi) Taylor, (202) 317-7180 or (202) 317-6901 (not 
toll-free numbers).

SUPPLEMENTARY INFORMATION: 

Background

I. Normal Retirement Age Generally

    This document contains proposed regulations under section 401(a) of 
the Internal Revenue Code (Code). Section 401(a) sets forth the 
qualification requirements for a trust forming part of a stock bonus, 
pension, or profit-sharing plan of an employer. Several of these 
qualification requirements are based on a plan's normal retirement age, 
including the regulatory interpretation of the requirement that the 
plan provide for definitely determinable benefits (generally after 
retirement). Final regulations defining normal retirement age for the 
definitely determinable requirement were published in the Federal 
Register as TD 9325 on May 22, 2007 (72 FR 28604) (2007 NRA 
regulations).
    Section 1.401(a)-1(b)(1) of the 2007 NRA regulations generally 
requires that a pension plan be established and maintained primarily to 
provide systematically for the payment of definitely determinable 
benefits over a period of years, usually for life, after retirement. 
The 2007 NRA regulations include two exceptions to the general rule 
that payments commence after retirement: (1) Payments can commence 
after attainment of normal retirement age; and (2) in accordance with 
section 401(a)(36), payments can commence after an employee reaches age 
62.
    Section 1.401(a)-1(b)(2)(i) of the 2007 NRA regulations provides 
that, as a general rule, a normal retirement age under a pension 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 (reasonably 
representative requirement). Section 1.401(a)-1(b)(2)(ii) of the 2007 
NRA regulations provides that a normal retirement age of age 62 or 
later is deemed to satisfy the reasonably representative requirement. 
Under section 1.401(a)-1(b)(2)(iii) of the 2007 NRA regulations, 
whether a normal retirement age that is not earlier than age 55 but is 
below age 62 satisfies the reasonably representative

[[Page 4600]]

requirement is based on a facts and circumstances analysis. Section 
1.401(a)-1(b)(2)(iv) of the 2007 NRA regulations provides that a normal 
retirement age that is lower than age 55 is presumed not to satisfy the 
reasonably representative requirement unless the Commissioner 
determines otherwise on the basis of facts and circumstances. Under 
Sec.  1.401(a)-1(b)(2)(v) of the 2007 NRA regulations, in the case of a 
pension plan in which substantially all of the participants are 
qualified public safety employees (within the meaning of section 
72(t)(10)(B)), a normal retirement age of age 50 or later is deemed to 
satisfy the reasonably representative requirement.
    As previously explained, normal retirement age is used by a pension 
plan in a variety of circumstances relating to plan qualification. 
Generally, in the case of a pension plan that is not a governmental 
plan under section 414(d) and is subject to the rules of section 411(a) 
through (d), normal retirement age is used in applying the rules under 
section 411(b) that are designed to preclude avoidance of the minimum 
vesting standards through the backloading of benefits (such as a 
benefit formula under which the rate of benefit accrual is increased 
disproportionately for employees with longer service). Normal 
retirement age is also relevant for such a plan for other purposes, 
including the application of the rules relating to suspension of 
benefits under section 411(a)(3)(B), plan offset rules under section 
411(b)(1)(H)(iii), and the minimum benefit rules applicable to non-key 
employee participants in the case of a top-heavy defined benefit plan 
under section 416. In addition, for such a plan, section 411(a)(8) 
defines the term normal retirement age as the earlier of (a) the time a 
participant attains normal retirement age under the plan or (b) the 
later of the time a plan participant attains age 65 or the 5th 
anniversary of the time a plan participant commenced participation in 
the plan.\1\
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    \1\ Section 411(f) provides a special normal retirement age rule 
that applies only to certain defined benefit plans that are subject 
to section 411(a) through (d). Section 411(f) was added to the Code 
on December 16, 2014 by Section 2 of Division P of the Consolidated 
and Further Continuing Appropriations Act, 2015, Public Law 113-235 
(128 Stat. 2130 (2014)), which also made a corresponding change to 
section 204 of the Employee Retirement Income Security Act of 1974, 
Public Law 93-406 (88 Stat. 829 (1974)), as amended (ERISA). Under 
section 101 of Reorganization Plan No. 4 of 1978 (92 Stat. 3790), 
the Secretary of the Treasury has interpretive jurisdiction over the 
subject matter addressed in section 411(f) for purposes of ERISA, as 
well as the Code.
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II. Normal Retirement Age Under a Governmental Plan

A. Application of Section 411 to Governmental Plans

    Section 414(d) of the Code provides that the term governmental plan 
generally means a plan established and maintained for its employees by 
the Government of the United States, by the government of any State or 
political subdivision thereof, or by any agency or instrumentality of 
any of the foregoing.\2\ See sections 3(32) and 4021(b)(2) of ERISA for 
definitions of the term governmental plan for purposes of title I and 
title IV of ERISA, respectively.
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    \2\ The term governmental plan also includes a plan that is 
established and maintained by an Indian tribal government (as 
defined in section 7701(a)(40)), a subdivision of an Indian tribal 
government (determined in accordance with section 7871(d)), or an 
agency or instrumentality of either, and all the participants of 
which are employees of such entity substantially all of whose 
services as such an employee are in the performance of essential 
governmental functions but not in the performance of commercial 
activities (whether or not an essential government function). In 
addition, the term governmental plan includes any plan to which the 
Railroad Retirement Act of 1935 or 1937 (49 Stat. 967, as amended by 
50 Stat. 307) applies and which is financed by contributions 
required under that Act and any plan of an international 
organization that is exempt from taxation by reason of the 
International Organizations Immunities Act, Public Law 79-291 (59 
Stat. 669).
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    Section 411(e)(1) of the Code provides that the provisions of 
section 411, other than section 411(e)(2), do not apply to a 
governmental plan. Under section 411(e)(2), a governmental plan is 
treated as meeting the requirements of section 411, for purposes of 
section 401(a), if the plan meets the vesting requirements resulting 
from the application of sections 401(a)(4) and 401(a)(7) as in effect 
on September 1, 1974 (pre-ERISA vesting rules). The only requirements 
under section 411 that apply to a governmental plan are the pre-ERISA 
vesting rules under section 411(e)(2). Thus, the definition of normal 
retirement age under section 411(a)(8) does not apply to a governmental 
plan. In addition, other rules of section 411, including section 
411(a)(3)(B) (related to suspension of benefits), section 411(b)(1) 
(related to backloading of benefits in a defined benefit plan), and 
section 411(b)(1)(H)(iii) (related to offsets after normal retirement 
age) do not apply to a governmental plan. Therefore, except for 
specific circumstances in which in-service benefit payments are 
permitted under Sec.  1.401(a)-1(b)(1), the definition of normal 
retirement age need not be used by a governmental plan for the same 
purposes that apply to a plan subject to section 411(a) through (d).\3\
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    \3\ Normal retirement age may also be relevant to participant 
eligibility for certain favorable tax treatment, including section 
402(l) (providing an income exclusion of up to $3,000 annually for 
certain distributions for health insurance and long-term care 
insurance premiums to eligible retired public safety officers who 
separate from service by reason of disability or attainment of 
normal retirement age) and the special catch-up provisions under 
Sec.  1.457-4(c)(3)(v)(A).
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B. Pre-ERISA Vesting Requirements for Governmental Plans

    Under section 411(e)(2), a normal retirement age under a 
governmental plan must satisfy the pre-ERISA vesting rules. The pre-
ERISA vesting rules applicable to governmental plans contain two basic 
components: (a) Rules relating to vesting and (b) rules relating to the 
right to commence benefits without reduction for early commencement. 
Rev. Rul. 66-11, 1966-1 C.B. 71, and Rev. Rul. 68-302, 1968-1 C.B. 163, 
illustrate the interplay between normal retirement age under the pre-
ERISA vesting rules and section 401(a). As described in these rulings, 
to satisfy the requirements of section 401(a), a plan that is subject 
to the pre-ERISA vesting rules must provide for full vesting of the 
contributions made to or benefits payable under the plan for any 
employee who has attained normal retirement age under the plan and 
satisfied any reasonable and uniformly applicable requirements as to 
length of service or participation described in the plan. For more 
information about these rules, see Part 5(c) of Publication 778, Guides 
for Qualification of Pension, Profit-Sharing, and Stock Bonus Plans 
(Pub. 778).
    Rev. Rul. 71-24, 1971-1 C.B. 114, illustrates the application of 
the pre-ERISA vesting rules to benefits provided under a pension plan 
for employees who continue employment after normal retirement age. Rev. 
Rul. 71-24 includes an example under which benefits are permitted to 
commence during employment after normal retirement age.
    As described in Rev. Rul. 71-147,\4\ 1971-1 C.B. 116, the normal 
retirement age in a pension or annuity plan under the pre-ERISA vesting 
rules is generally the lowest age specified in the plan at which the 
employee has the right to retire without the consent of the employer 
and receive retirement benefits based on the amount of the employee's 
service to the date of retirement at the full rate set forth in the

[[Page 4601]]

plan (that is, without actuarial or similar reduction because of 
retirement before some later specified age). Rev. Rul. 71-147 does not 
explicitly require a plan to include a provision defining normal 
retirement age. Instead, a plan's normal retirement age may be deduced 
from other plan provisions. As described in Rev. Rul. 71-147, although 
normal retirement age under a pension or annuity plan is ordinarily age 
65, a plan may specify a lower age at which the employee has the right 
to retire without the consent of the employer and to receive retirement 
benefits based on the amount of the employee's service at the full rate 
set forth in the plan if this lower age would be an age at which 
employees customarily retire in the particular company or industry, and 
if the provision permitting receipt of unreduced benefits at this age 
is not a device to accelerate funding. For more information about these 
rules, see also Part 5(e) of Pub. 778.
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    \4\ Even though Rev. Rul. 71-147 was superseded by Rev. Rul. 80-
276, 1980-1 C.B. 131, for plans subject to section 411(a)(8), Rev. 
Rul. 71-147 remains valid guidance for purposes of the pre-ERISA 
vesting rules.
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III. Application of the 2007 NRA Regulations to Governmental Plans

    Notice 2007-69, 2007-2 C.B. 468, asked for comments ``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 Sec.  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 were received on a variety of issues, including 
comments that guidance should be issued to (1) clarify that 
governmental plans are not required to define normal retirement age, 
(2) provide safe harbor rules that would permit a governmental plan to 
define normal retirement age that includes a service component, and (3) 
provide that the age-50 safe harbor rule in Sec.  1.401(a)-1(b)(2)(v) 
for qualified public safety employees can apply to these employees even 
if less than substantially all of a plan's participants are qualified 
public safety employees.
    The 2007 NRA regulations provided that, in the case of governmental 
plans, the regulations would be effective for plan years beginning on 
or after January 1, 2009. Notices 2008-98, 2008-44 I.R.B. 1080, and 
2009-86, 2009-6 I.R.B. 629, provided that the Department of the 
Treasury and the IRS intended to amend the 2007 NRA regulations to 
change the effective date of the 2007 NRA regulations for governmental 
plans to January 1, 2013.
    Notice 2012-29, 2012-18 I.R.B. 872, announced that the Department 
of the Treasury and the IRS intend to modify provisions of the 2007 NRA 
regulations as applied to governmental plans in two ways. First, Notice 
2012-29 announced the intent to modify the regulations to clarify that 
a governmental plan that is not subject to section 411(a) through (d) 
and does not provide for the payment of in-service distributions before 
age 62 will not fail to satisfy the requirement that the plan provide 
definitely determinable benefits to employees after retirement or 
attainment of normal retirement age merely because the pension plan 
does not have a definition of normal retirement age or does not have a 
definition of normal retirement age that satisfies the requirements of 
the 2007 NRA regulations.
    Second, Notice 2012-29 announced the intent to modify the 2007 NRA 
regulations to provide that the rule deeming age 50 or later to be a 
normal retirement age that satisfies the 2007 NRA regulations will 
apply to a group of employees substantially all of whom are qualified 
public safety employees, whether or not the group of qualified public 
safety employees are covered by a separate plan. Thus, under the 
intended modification, a governmental plan would be permitted to 
satisfy the reasonably representative requirement using a normal 
retirement age as low as 50 for a group substantially all of whom are 
qualified public safety employees and a later normal retirement age 
that otherwise satisfies the 2007 NRA requirements for all other 
participants.
    Notice 2012-29 requested comments from governmental stakeholders on 
the guidance under consideration. Specific comments were requested on 
whether a new rule should be provided under which retirement after 20 
to 30 years of service may be a normal retirement age that is 
reasonably representative of the typical retirement age for the 
industry in which qualified public safety employees are employed 
because these employees tend to have career spans that commence at a 
young age and continue over a limited number of years. Many commenters 
wrote that such a rule would be helpful and appropriate. Several 
commenters requested a rule that would permit a governmental plan to 
use the completion of 20 or more years of service as a normal 
retirement age for public safety employees.
    Comments were also requested on whether there are other categories 
of governmental employees who have career spans similar to qualified 
public safety employees for whom a rule should be provided that is 
similar to the safe harbor for qualified public safety employees. Many 
commenters recommended a rule that would permit governmental plans to 
use the completion of a number of years of service as a normal 
retirement age for all employees, not just qualified public safety 
employees.
    Notice 2012-29 also requested information on the overall retirement 
patterns of employees in government service to assist the Department of 
the Treasury and the IRS in determining the earliest age that is 
reasonably representative of the typical retirement ages for the 
industry in which these employees are employed. One commenter provided 
data on the retirement patterns and median normal retirement ages for 
participants in a state retirement system.
    Notice 2012-29 also provided that the Department of the Treasury 
and the IRS intend to amend the 2007 NRA regulations to modify the 
effective date of the 2007 NRA regulations for governmental plans to 
annuity starting dates that occur in plan years beginning on or after 
the later of (1) January 1, 2015 or (2) the close of the first regular 
legislative session of the legislative body with the authority to amend 
the plan that begins on or after the date that is 3 months after the 
final regulations are published in the Federal Register.

Explanation of Provisions

I. Overview

    These proposed regulations would provide guidance with respect to 
the applicability of the 2007 NRA regulations to governmental plans. 
These proposed regulations, when finalized, would provide guidance 
relating to the determination of whether the normal retirement age 
under a governmental plan satisfies the requirements of section 401(a) 
by amending the 2007 NRA regulations to provide additional rules for 
governmental plans. In addition, these proposed regulations would also 
include a minor change to the 2007 NRA regulations to reflect the 
addition of section 411(f), which provides a special rule for 
determining a permissible normal retirement age that applies only to 
certain defined benefit plans that are not governmental plans.

II. Use of Years of Service as a Component of the Pre-ERISA Vesting 
Rules

    In response to Notice 2012-29, the Department of the Treasury and 
the IRS received a range of comments regarding the pre-ERISA vesting 
rules that apply to a governmental plan's normal retirement age. In 
particular, the Department of the Treasury and the IRS received many 
comments requesting

[[Page 4602]]

rules that would permit governmental plans to define normal retirement 
age by reference to a period of service. Comments also focused on 
whether a governmental plan is required to include an explicit 
definition of normal retirement age.
    As previously stated, a normal retirement age under a governmental 
plan must satisfy the pre-ERISA vesting rules. The Department of the 
Treasury and the IRS generally agree with those commenters who 
indicated that the pre-ERISA vesting rules applicable to normal 
retirement age may be read to permit a governmental plan to use a 
normal retirement age that reflects a period of service. Under pre-
ERISA vesting rules, use of a period of service to determine normal 
retirement age under a governmental plan would be permissible if the 
period of service used is reasonable and uniformly applicable and the 
other pre-ERISA rules related to normal retirement age are satisfied. 
One of the pre-ERISA rules permits a governmental plan to specify a 
normal retirement age that is lower than age 65 if that age represents 
the age at which employees customarily retire in the industry.
    Under the pre-ERISA rules related to normal retirement age, the 
terms of a governmental plan are not required to include an explicit 
definition of the term normal retirement age in order to satisfy 
section 401(a). However, in the absence of an explicit definition of 
normal retirement age, the terms of the plan must specify the earliest 
age at which a participant has the right to retire without the consent 
of the employer and to receive retirement benefits based upon the 
amount of the participant's service on the date of retirement at the 
full rate set forth in the plan (that is, without actuarial or similar 
reduction because of retirement before some later specified age). That 
age (the earliest age described in the preceding sentence) will be 
considered the plan's normal retirement age for purposes of any 
statutory or regulatory requirements based on a normal retirement age.
    Consistent with Notice 2012-29, the proposed regulations would 
provide that a governmental plan that does not provide for the payment 
of in-service distributions before age 62 would not fail to satisfy 
Sec.  1.401(a)-1(b)(1) under these proposed regulations merely because 
the pension plan has a normal retirement age that is earlier than 
otherwise permitted under the requirements of Sec.  1.401(a)-1(b)(2) of 
the 2007 NRA regulations (as proposed to be amended by these proposed 
regulations). Instead, because section 411(a) through (d) does not 
apply, the earlier normal retirement age under such a plan is treated 
as the age as of which an unreduced early retirement benefit is payable 
for purposes of these regulations.

III. Normal Retirement Age Must Satisfy the Reasonably Representative 
Requirement

A. In General

    These proposed regulations would apply the reasonably 
representative requirement in the 2007 NRA regulations to governmental 
plans. Thus, the normal retirement age under a governmental 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.

B. General Safe Harbor

    These proposed regulations would apply to governmental plans the 
safe harbor in the 2007 NRA regulations that a normal retirement age of 
at least age 62 is deemed to satisfy the reasonably representative 
requirement. Thus, a governmental plan satisfies this safe harbor if 
the normal retirement age under the plan is age 62 or if the normal 
retirement age is the later of age 62 or another specified date, such 
as the fifth anniversary of plan participation.

C. Safe Harbors for Governmental Plans

    To address comments regarding the need for additional safe harbors 
for governmental plans, including safe harbors that reflect permissible 
periods of service, these proposed regulations would provide several 
additional alternative safe harbors that a governmental plan could 
satisfy. The safe harbors included in these proposed regulations were 
developed based upon feedback provided in comments received in response 
to Notices 2007-69 and 2012-29.
1. Age 60 and 5 Years of Service
    Under these proposed regulations, a normal retirement age under a 
governmental plan that is the later of age 60 or the age at which the 
participant has been credited with at least 5 years of service would be 
deemed to satisfy the reasonably representative requirement.
2. Age 55 and 10 Years of Service
    Similarly, a normal retirement age under a governmental plan that 
is the later of 55 or the age at which the participant has been 
credited with at least 10 years of service would be deemed to satisfy 
the reasonably representative requirement. Thus, for example, a normal 
retirement age under a governmental plan that is the later of age 55 or 
the age at which the participant has been credited with 12 years of 
service would satisfy this safe harbor.
3. Combined Age and Years of Service of 80 or More
    A normal retirement age under a governmental plan that is the 
participant's age if the sum of the participant's age plus the number 
of years of service that have been credited to the participant under 
the plan equals 80 or more would also be deemed to satisfy the 
reasonably representative requirement. For example, a participant in a 
governmental plan who is age 55 and who has been credited with 25 years 
of service under the plan would satisfy this safe harbor.
4. Any Age With 25 years of Service (in Combination With a Safe Harbor 
That Includes an Age)
    A governmental plan would also be permitted to combine any of the 
other safe harbors (except for the qualified public safety employee 
safe harbors) provided under the proposed regulations with 25 years of 
service, so that a participant's normal retirement age would be the 
participant's age when the number of years of service that have been 
credited to the participant under the plan equals 25 if that age is 
earlier than what the participant's normal retirement age would be 
under the other safe harbor(s). For example, a normal retirement age 
under a governmental plan would satisfy the reasonably representative 
requirement if the normal retirement age is the earlier of (1) the 
participant's age when the participant has been credited with 25 years 
of service under the plan and (2) the later of age 60 or the age when 
the participant has been credited with 5 years of service under the 
plan. Use of 25 years of service by a governmental plan for normal 
retirement age generally would not satisfy the pre-ERISA vesting 
requirement relating to normal retirement age, unless it is used in 
conjunction with an alternative normal retirement age that includes an 
age component and that otherwise satisfies the pre-ERISA rules. This is 
because the pre-ERISA vesting requirements allow for a service 
component only if that component does not unreasonably delay full 
vesting. For example, applying a 25 years of service requirement 
(without an alternative normal retirement age) to a newly-hired 63-
year-old employee would not be reasonable because it would result in a 
normal retirement age of 88. See generally, Rev. Rul. 66-11.

[[Page 4603]]

D. Qualified Public Safety Employees

    The proposed regulations include three safe harbors specifically 
for qualified public safety employees. The safe harbors were developed 
based upon feedback provided in comments received in response to 
Notices 2007-69 and 2012-29. Consistent with Notice 2012-29 and in 
response to comments, the proposed regulations would make clear that a 
governmental plan is permitted to use one or more of the safe harbors 
for qualified public safety employees to satisfy the reasonably 
representative requirement for those employees even if a different 
normal retirement age or ages is used under the plan for one or more 
other categories of participants who are not qualified public safety 
employees. The safe harbors for qualified public safety employees are 
not permitted to be used for these other categories of participants; a 
different normal retirement age (or ages) must be used for participants 
in a plan who are not qualified public safety employees.
    As under the 2007 NRA regulations, the term qualified public safety 
employee would be defined by reference to section 72(t)(10)(B), under 
which a qualified public safety employee means any employee of a State 
or political subdivision of a State who provides police protection, 
firefighting services, or emergency medical services for any area 
within the jurisdiction of such State or political subdivision.\5\ 
Defining qualified public safety employee by reference to section 
72(t)(10)(B) has been retained because it is closely aligned with the 
categories of employees described in the Age Discrimination in 
Employment Act that an employer may refrain from hiring after a certain 
age.\6\ Because qualified public safety employees typically commence 
plan participation at younger ages, the period of service required for 
full vesting at normal retirement age under each of the safe harbors 
for qualified public safety employees should be reasonable.
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    \5\ Section 72(t)(10)(B) was amended by section 2(a) of 
Defending Public Safety Employees' Retirement Act, Public Law 114-26 
(129 Stat. 319) (2015)) and section 308 of Protecting Americans From 
Tax Hikes Act of 2015 (PATH Act), enacted as part of the 
Consolidated Appropriations Act, 2016, Public Law 114-113 (129 Stat. 
2422), to include federal public safety employees as qualified 
public safety employees for purposes of the rules under section 
72(t)(10). Thus, for distributions made after December 31, 2015, the 
term qualified public safety employee means any employee of a State 
or political subdivision of a State who provides police protection, 
firefighting services, or emergency medical services for any area 
within the jurisdiction of such State or political subdivision, or 
any Federal law enforcement officer described in section 8331(20) or 
8401(17) of title 5, United States Code, any Federal customs and 
border protection officer described in section 8331(31) or 8401(36) 
of such title, any Federal firefighter described in section 8331(21) 
or 8401(14) of such title, or any air traffic controller described 
in 8331(30) or 8401(35) of such title, any nuclear materials courier 
described in section 8331(27) or 8401(33) of such title, any member 
of the United States Capitol Police, any member of the Supreme Court 
Police, and any diplomatic security special agent of the Department 
of State.
    \6\ See section 4(j) of the Age Discrimination in Employment 
Act, 29 U.S.C. 623(j).
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1. Age 50
    The proposed regulations would modify the safe harbor for qualified 
public safety employees that was provided in the 2007 NRA regulations 
under which a normal retirement age of age 50 or later is deemed to 
satisfy the reasonably representative requirement and would expand on 
the guidance under consideration described in Notice 2012-29. The 
proposed regulations would make clear that a governmental plan is 
permitted to use the safe harbor (alone or together with one or both of 
the other safe harbors for qualified public safety employees described 
in this preamble) for one or more qualified public safety employees in 
a governmental plan without regard to any ``substantially all'' 
requirement (that is, without regard to whether substantially all of 
the participants in the plan or substantially all of the participants 
within a group of participants are qualified public safety employees).
2. Combined Age and Years of Service of 70 or More
    The proposed regulations would add a safe harbor under which a 
normal retirement age for qualified public safety employees under a 
governmental plan that is the participant's age when the sum of the 
participant's age plus the number of years of service that have been 
credited to the participant under the plan equals 70 or more would be 
deemed to satisfy the reasonably representative requirement.
3. Any Age With 20 Years of Service
    The proposed regulations would also add a safe harbor under which a 
normal retirement age for qualified public safety employees under a 
governmental plan that is the participant's age when the number of 
years of service that have been credited to the participant under the 
plan equals 20 or more would be deemed to satisfy the reasonably 
representative requirement. For example, a normal retirement age for 
qualified public safety employees under a plan that is 25 years of 
service would satisfy this safe harbor. The Department of the Treasury 
and the IRS agree with the comments received in response to Notice 
2012-29 that indicated that a safe harbor based solely on a period of 
service would be appropriate for qualified public safety employees 
because these employees typically have career spans that commence at a 
young age and continue over a limited period of years.

E. Multiple Normal Retirement Ages in a Governmental Plan

    Commenters on Notice 2012-29 stated that it is a common practice 
for governmental plans to have a normal retirement age that is a 
combination of age and years of service. In light of these comments, 
some of the safe harbors proposed in these regulations contemplate a 
combination of age and years of service, such as, for example, the use 
of a normal retirement age that is the earlier of (1) the participant's 
age when the participant has been credited with 30 years of service 
under the plan or (2) the later of age 60 or the age when the 
participant has been credited with 5 years of service under the plan. A 
normal retirement age under a governmental plan that is consistent with 
the safe harbors in these proposed regulations would not fail to 
satisfy the pre-ERISA requirements, including the requirement that any 
period of service required for vesting at normal retirement age be 
uniformly applicable to all employees in a plan, merely because the 
plan uses such a normal retirement age.
    Commenters to Notice 2012-29 also stated that governmental plans 
typically provide multiple normal retirement ages, often based on 
different benefit structures or classifications of employees in a 
single plan. These comments expressed concern that certain language in 
Notice 2012-29 \7\ could be read to indicate that a governmental plan 
could only have two normal retirement ages if one of the normal 
retirement ages covered qualified public safety employees and the other 
normal retirement age covered all of the other participants in the 
plan.
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    \7\ Notice 2012-29 provided that, under an anticipated amendment 
to the 2007 NRA regulations, a governmental plan would be permitted 
to satisfy the reasonably representative requirement using a normal 
retirement age as low as 50 for a group substantially all of whom 
are qualified public safety employees and a later normal retirement 
age that otherwise satisfies the 2007 NRA requirements for all other 
participants.
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    Use of one normal retirement age for one classification of 
employees (such as qualified public safety employees) and one or more 
other normal retirement ages for one or more different classifications 
of employees would not

[[Page 4604]]

be inconsistent with these proposed regulations and generally would not 
be inconsistent with the applicable pre-ERISA requirements, including 
the requirement that any period of service required for full vesting at 
normal retirement age be uniformly applicable. Similarly, the use of 
one normal retirement age under a governmental plan for employees hired 
before a certain date and another normal retirement age under the plan 
for employees hired on or after that date generally would not fail to 
satisfy the applicable pre-ERISA requirements.

F. Other Normal Retirement Ages

    The proposed regulations would provide that in the case of a normal 
retirement age under a governmental plan that fails to satisfy any of 
the governmental plan safe harbors, whether the normal retirement age 
satisfies the reasonably representative requirement would be based on 
all of the relevant facts and circumstances. Similar to the treatment 
of normal retirement ages between ages 55 and 62 under the 2007 NRA 
regulations, it is generally expected that a good faith determination 
of the typical retirement age for the industry in which the covered 
workforce is employed that is made by the employer will be given 
deference, assuming that the determination is reasonable under the 
facts and circumstances and that the normal retirement age is otherwise 
consistent with the pre-ERISA vesting requirements.

Proposed Effective Date

    These regulations are proposed to be effective for employees hired 
during plan years beginning on or after the later of (1) January 1, 
2017 or (2) the close of the first regular legislative session of the 
legislative body with the authority to amend the plan that begins on or 
after the date that is 3 months after the final regulations are 
published in the Federal Register. Governmental plan sponsors may rely 
on these proposed regulations for periods preceding the effective date, 
pending the issuance of final regulations. If and to the extent the 
final regulations are more restrictive than the rules in these proposed 
regulations, those provisions of the final regulations will be applied 
without retroactive effect.

Statement of Availability for IRS Documents

    For copies of recently issued Revenue Procedures, Revenue Rulings, 
Notices, and other guidance published in the Internal Revenue Bulletin 
or Cumulative Bulletin, please visit the IRS Web site at http://www.irs.gov or the Superintendent of Documents, U.S. Government 
Publishing Office, Washington, DC 20402.

Special Analyses

    Certain IRS regulations, including this one, are exempt from the 
requirements of Executive Order 12866, as supplemented and reaffirmed 
by Executive Order 13563. Therefore, a regulatory assessment is not 
required. It has also been determined that 5 U.S.C. 533(b) of the 
Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to 
these regulations. In addition, because no collection of information is 
imposed on small entities, the provisions of the Regulatory Flexibility 
Act (5 U.S.C. chapter 6) do not apply and a Regulatory Flexibility 
Analysis is not required. Pursuant to section 7805(f) of the Internal 
Revenue Code, these regulations have been submitted to the Office of 
Chief Counsel for Advocacy of the Small Business Administration for 
comments on its impact on small business.

Comments and Requests for Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any comments that are submitted timely 
to the IRS as prescribed in this preamble under the ADDRESSES heading. 
All comments are available at www.regulations.gov or upon request. A 
public hearing will be scheduled if requested in writing by any person 
who timely submits written comments. If a public hearing is scheduled, 
notice of the date, time, and place of the public hearing will be 
published in the Federal Register.

Drafting Information

    The principal authors of these regulations are Sarah R. Bolen and 
Pamela R. Kinard, Office of Associate Chief Counsel (Tax Exempt and 
Government Entities). However, other personnel from the Department of 
the Treasury and the IRS participated in the development of these 
regulations.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority:  26 U.S.C. 7805 * * *

0
Par. 2. Section 1.401(a)-1 is amended by:
0
1. Revising paragraph (b)(2)(v).
0
2. Adding paragraph (b)(2)(vi).
0
3. Revising the heading and the second sentence of paragraph (b)(4).
    The revisions read as follows:


Sec.  1.401(a)-1  Post-ERISA qualified plans and qualified trusts; in 
general.

* * * * *
    (b) * * *
    (2) * * *
    (v) Rules of application for governmental plans--(A) In general. In 
the case of a governmental plan (within the meaning of section 414(d)) 
that provides for distributions before retirement, the general rule 
described in paragraph (b)(2)(i) of this section may be satisfied in 
accordance with paragraph (b)(2)(ii) of this section or this paragraph 
(b)(2)(v). In the case of a governmental plan that does not provide for 
distributions before retirement, the plan's normal retirement age is 
not required to comply with the general rule described in paragraph 
(b)(2)(i) of this section or this paragraph (b)(2)(v).
    (B) Age 60 and 5 years of service safe harbor. A normal retirement 
age under a governmental plan that is the later of age 60 or the age at 
which the participant has been credited with at least 5 years of 
service under the plan is deemed to be 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.
    (C) Age 55 and 10 years of service safe harbor. A normal retirement 
age under a governmental plan that is the later of age 55 or the age at 
which the participant has been credited with at least 10 years of 
service under the plan is deemed to be 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.
    (D) Sum of 80 safe harbor. A normal retirement age under a 
governmental plan that is the participant's age at which the sum of the 
participant's age plus the number of years of service that have been 
credited to the participant under the plan equals 80 or more is deemed 
to be not earlier than the earliest age that is reasonably 
representative of the typical retirement age for the industry in which 
the

[[Page 4605]]

covered workforce is employed. For example, a normal retirement age 
under a governmental plan that is age 55 for a participant who has been 
credited with 25 years of service would satisfy the rule described in 
this paragraph.
    (E) Service-based combination safe harbor. A normal retirement age 
under a governmental plan that is the earlier of the participant's age 
at which the participant has been credited with at least 25 years of 
service under the plan and an age that satisfies any other safe harbor 
provided under paragraphs (b)(2)(v)(B) through (D) of this section is 
deemed to be 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 example, a normal retirement age 
under a governmental plan that is the earlier of the participant's age 
at which the participant has been credited with 25 years of service 
under the plan and the later of age 60 or the age at which the 
participant has been credited with 5 years of service under the plan 
would satisfy this safe harbor.
    (F) Age 50 safe harbor for qualified public safety employees. A 
normal retirement age under a governmental plan that is age 50 or later 
is deemed to be 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 if the participants to which this 
normal retirement age applies are qualified public safety employees 
(within the meaning of section 72(t)(10)(B)).
    (G) Sum of 70 safe harbor for qualified public safety employees. A 
normal retirement age under a governmental plan that is the 
participant's age at which the sum of the participant's age plus the 
number of years of service that have been credited to the participant 
under the plan equals 70 or more, is deemed to be 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 if the participants to which this normal retirement age 
applies are qualified public safety employees (within the meaning of 
section 72(t)(10)(B)).
    (H) Service-based safe harbor for qualified public safety 
employees. A normal retirement age under a governmental plan that is 
the age at which the participant has been credited with at least 20 
years of service under the plan is deemed to be 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 if the participants to which this normal retirement age 
applies are qualified public safety employees (within the meaning of 
section 72(t)(10)(B)). For example, a normal retirement age that covers 
only qualified public safety employees and that is an employee's age 
when the employee has been credited with 25 years of service under a 
governmental plan would satisfy this safe harbor.
    (I) Reserved.
    (J) Other normal retirement ages. In the case of a normal 
retirement age under a governmental plan that fails to satisfy any safe 
harbor described in paragraph (b)(2)(ii) of this section or this 
paragraph (b)(2)(v), whether the age 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 is based on all 
of the relevant facts and circumstances.
    (vi) Special normal retirement age rule for certain plans. See 
section 411(f), which provides a special rule for determining a 
permissible normal retirement age under certain defined benefit plans.
* * * * *
    (4) Effective/applicability date. * * * In the case of a 
governmental plan (as defined in section 414(d)), the rules in 
paragraph (b)(2)(v) of this section are effective for employees hired 
during plan years beginning on or after the later of: January 1, 2017; 
or the close of the first regular legislative session of the 
legislative body with the authority to amend the plan that begins on or 
after the date that is 3 months after the final regulations are 
published in the Federal Register. However, a governmental plan sponsor 
may elect to apply the rules of paragraph (b)(2)(v) of this section to 
earlier periods. * * *

John M. Dalrymple,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2016-01639 Filed 1-26-16; 8:45 am]
 BILLING CODE 4830-01-P