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WASHINGTON – As credit unions battle the Internal Revenue Service on 457 plans, IRS’ proposed section 415 could hurt those who work beyond age 65 and small owners, the American Society of Pension Professionals & Actuaries recently testified. ASPPA President Jim Jaffe spoke at a recent IRS hearing on the ways defined benefit and defined contribution retirement plans are regulated under Section 415 of the Internal Revenue Code. He warned that an IRS proposal to link existing compensation limits under Code Section 401 to the Code Section 415 requirements would directly conflict with existing authority and could substantially reduce permissible benefits for those who either chose to work beyond age 65 or defer payment of accrued benefits beyond this deadline. Rosen was also critical of a proposed change in Code Section 415 regarding limits on compensation that takes into account a participant’s highest three years of compensation. “While decades of existing law has used a “high three” standard without regard to plan participation, the proposed change would limit the average to only active participation in the relevant plan,” Jaffe said. “The proposed change could be disadvantageous to those whose peak incomes were recorded prior to their participation in a plan.” Jaffe also suggested that the IRS show added flexibility in determining the effective of the regulations, given that the proposed regulations changes existing guidance that has been in place for almost three decades. The ASPPA is a national organization of over 5,500 retirement plan professionals, provide consulting and administrative services for qualified retirement plans covering millions of American workers.

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