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Pension Regulations

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SHRM submitted comments to the U.S. Department of Treasury and the Internal Revenue Service on proposed rules that would govern “phased retirement.”  As part of the newly-enacted Pension Protection Act (P.L. 109-280), the Treasury Department requested the public’s views. 

“Phased retirement” refers to flexible retirement arrangements that allow employees who are approaching normal retirement age to reduce the number of hours worked or work in a different capacity. 

Background:  The Treasury Department considered this issue back in late 2004 and SHRM submitted comments.  However, no final rule was ever published.  Now, Treasury is reconsidering “phased retirement” to ensure that any guidance it issues is consistent with recent changes in the Tax Code brought about by the passage of the Pension Protection Act.  For those of us who are not tax lawyers, this section of the Tax Code says that a pension plan may pay benefits before retirement to an employee who has reached age 62 and who is not separated from employment at the time of the distribution.

SHRM recommended that the Treasury Department: 1) allow employers to determine whether in-service distributions should be considered as subsidized or unsubsidized; 2) provide that subsidized benefits be treated as an optional form of benefits; and 3) re-issue proposed regulations regarding in-service distributions pursuant to a bona fide phased retirement program.

To view a copy of the comments submitted by SHRM, please click HERE


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