The wheels of justice may grind slowly, but they don't hold a candle to the IRS. About midway through 2007, the agency issued final regulations defining normal retirement for defined benefit or money purchase pension plan purposes. The new rules finalize one aspect of proposed regulations issued in 2004 that were designed to sanction certain phased-retirement programs, but the agency says it still needs more time to resolve the issue completely. The entire matter actually stems from IRS guidance defining normal retirement age (NRA) first issued in 1971 and later modified in 1978.

In a nutshell, the new regulations, which fall under Internal Revenue Code Section 411, provide that employees covered by qualified pension plans may receive distributions from the plan even if they are still working after reaching age 62 (a benchmark set in the Pension Protection Act of 2006).They define NRA as an age "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."

Specific guidelines in the regulations include:

• an NRA of 62 as a general standard,
• an employer's determination of an NRA age of 55 to 62 as meeting industry standards will be given deference as long as it can be materially supported, and
• an NRA below 55 is presumed not to be acceptable, but plan sponsors have the right to argue the case that it meets their particular industry standard to the IRS.

Most qualified plans are already in compliance with the new NRA standards, according to guidance issued by Buck Consultants, LLC, a leading benefits consulting firm. Certain cash balance and hybrid plans may have to redefine their NRA to avoid plan disqualification.