Another Legislative Win for the RS Plan

Passage of the Continuing Resolution and Omnibus Spending Bill results in positive news for Retirement Security (RS) Plan participants wishing to exercise the service based quasi-retirement feature.

The bill includes NRECA-specific legislation (H.R. 5792) that ensures all cooperative employees hired on or before January 1, 2017, with access to the service-based quasi-retirement feature of the RS Plan with a “30 year/age 62” design. This protects over 10,000 current employees at more than 300 co-ops.

Employees hired at co-ops after January 1, 2017, will no longer have access to the service-based quasi-retirement feature, but can still retire after 30 years of service and begin to receive unreduced retirement benefits at that time.

Protecting the service-based quasi-retirement feature
In 2007, the Internal Revenue Service (IRS) issued a regulation calling the service-based quasi-retirement feature into question for anyone reaching 30 years of benefit service prior to age 62 in a “30 year/age 62” plan. It also forced NRECA to prevent participants younger than age 55 from receiving quasi-retirement distributions from the RS Plan at all. As a result of NRECA’s grassroots lobbying effort, the IRS granted NRECA a “stay” on enforcing this regulation pending a review of the RS Plan’s policies and procedures.

After several years of inactivity, the IRS recently informed NRECA that a service-based retirement age was impermissible for private sector qualified retirement plans (such as the RS Plan) and that the IRS would begin enforcing the above-referenced regulation. To prevent this, congressional leaders included NRECA-specific legislation (H.R. 5792) into the Continuing Resolution and Omnibus Spending Bill.

Multiple employer versus union/multiemployer
The Continuing Resolution and Omnibus Spending Bill also contains separate provisions that allow union/multiemployer plans to reduce previously guaranteed pension benefits for retirees in certain situations. It is important to note that the RS and 401(k) Pension Plans are multiple employer plans. While the terms are similar, the rules and regulations for each are completely different. Therefore, the provisions relating to multiemployer plans are not applicable to the RS and 401(k) Plans. NRECA did not participate in any of the discussions regarding these “union/multiemployer” pension plans and they have no impact on the NRECA RS Plan.

Questions
If you have any questions on this legislation and the impact to the RS Plan, please contact your local field representative or NRECA’s Member Contact Center at 866.673.2299 or contactcenter@nreca.coop.