Retirement topics - Significant ages for retirement plan participants

An employer-sponsored retirement plan cannot exclude an employee from participating after the employee turns age 21 (and completes the necessary service requirement).

Note: SIMPLE IRA plans have no minimum age requirement.

In the year of turning 50 or older, annual catch-up contributions may be made to:

• IRAs
• employer-sponsored plans that accept elective deferrals

A public safety employee who receives a distribution from a governmental defined benefit plan after separation from service is not subject to the 10% additional tax on early distributions if the distribution occurs in the year of turning 50 or older.

An employee who receives a distribution from a qualified plan after separation from service is not subject to the 10% additional tax on early distributions if the distribution occurs in the year of turning 55 or older.

Distributions from qualified retirement plans, including IRAs, are not subject to the 10% additional tax on early distributions once the recipient turns 59½.

A pension plan may pay benefits to a participant age 62 or older even if the participant has not separated from employment. The rules regarding a plan’s youngest permissible normal retirement age have a safe harbor of age 62.

Defined benefit plans often calculate retirement benefits based on annuities beginning at age 65.

Unless a participant elects otherwise, benefits under a qualified plan must begin within 60 days after the close of the latest plan year in which the participant: 

1. turns 65 (or the plan’s normal retirement age, if earlier);
2. completes 10 years of plan participation; or
3. terminates service with the employer.

Required minimum distributions must generally start by April 1 following the year of turning 70½, for plan participants and IRA owners who reach age 70 ½ prior to January 1, 2020.

A qualified plan may allow participants to delay taking distributions until after retirement (unless the participant is a 5% owner).

The SECURE Act made major changes to the RMD rules. For plan participants and IRA owners who reach the age of 70 ½ in 2019, the prior rule applies and the first RMD must start by April 1, 2020.  For plan participants and IRA owners who reach age 70 ½ in 2020, the first RMD must start by April 1 of the year after the plan participant or IRA owner reaches 72.