April 20, 2012 – The Internal Revenue Service (IRS) announced April 18 that it has agreed to overhaul proposed regulations that would have created significant problems for many public sector pension plans. Under the original regulations, all public sector pension plans would have been required to specify a “Normal Retirement Age,” and would not have been allowed to define retirement based on years of service or a combination of age and years of service. For example, plans that defined normal retirement as “age 50 with 25 years of service” would have been in danger of losing their tax exempt status. The proposed revisions represent a significant victory for the IAFF, capping a five-year campaign to protect fire fighter pension plans.

Under the proposed revisions, pension plans would not be required to maintain a specific normal retirement age unless the plan allowed for “in-service distributions” before age 62. In-service distributions, which are generally not used in public safety occupations, occur when a person who has reached retirement age draws a pension benefit while they continue working and receiving their salary.

The revised regulations contain other important provisions advocated by the IAFF, including delaying the effective date until January 1, 2015. This will give pension plans ample time to make any necessary changes to their plan documents to assure they are in full compliance.

There are still a number of details that need to be clarified, including the precise definition of in-service distribution, and the IAFF will be working with the IRS in the coming months to ensure that these technical issues are resolved in a way that assures the regulations do not interfere with public safety pension plans.

“The decision by the IRS to heed the concerns raised by the nation’s professional fire fighters is a victory for common sense government,” says IAFF General President Harold Schaitberger. “After too many years of uncertainty, the IRS has now taken the necessary steps to ensure that fire fighters pension benefits will not be endangered.”

REPOST from IAFF.org news.