Recent Developments in Benefit Plans
Average Retirement Age. In 2013, the average retirement age was approximately 64 for men and 62 for women, about the same as a decade earlier, according to a report from the Center for Retirement Research at Boston College. The researchers define average retirement age as the age at which the rate of labor force participation drops below 50%.
Automatic Enrollment Error Corrections. The IRS has provided new safe harbor correction methods for errors related to 401(k) plan automatic enrollment (Revenue Procedure 2015-28). Generally, if an employer fails to automatically enroll an employee, the employer will not have to make a qualified nonelective contribution (QNEC) for the missed elective deferrals if the error is detected within 9½ months after the end of the plan year of the failure and certain conditions are met. Correct deferrals must begin no later than the first payment of compensation made on or after the last day of the 9½-month period (or earlier, if the employee notifies the employer of the mistake). Additional requirements and correction methods are also provided in the guidance.
New Lump-sum Prohibition. The IRS is amending the tax law’s required minimum distribution regulations to provide that qualified defined benefit plans generally are not permitted to replace any joint and survivor, single life, or other annuity currently being paid with a lump-sum payment or other accelerated form of distribution. With limited exceptions, the amendments apply as of July 9, 2015.