New IRS Regulations Extended Again

Posted on November 9, 2009 by Donald Barbati

 

After much concern regarding the new Treasury Regulations promulgated by the Internal Revenue Service (“IRS”) and their potential impact on members of government pensions plans, the IRS and the Department of Treasury extended the date by which a government plan must comply with final regulations on distributions from a pension plan upon attainment of normal retirement age. Under the extension, the new regulations will be effective for a governmental plan for plan years beginning on or after January 1, 2013.

As described in three previous blog entries, the IRS modified Treasury Regulation §1.401(a)-1 to provide an exception to the rule that pension benefits be paid only after retirement by permitting a pension plan to commence payment of retirement benefits to a participant after the participant has attained normal retirement age even if the participant has not yet had a severance from employment with the employer maintaining the plan.

The new regulations also require a pension plan’s normal retirement age to be an age that is not earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed. In the case of a retirement plan where substantially all of the participants are qualified public safety officers, a normal retirement age of age 50 or later is deemed not to be earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed.

Notice 2007-69, which provided temporary relief of certain plans that may have to change their definitions of normal retirement age to satisfy the new regulations, indicated that the new regulations do not contain a safe harbor or other guidance with respect to a normal retirement age conditioned on the completion of a stated number years of service. The notice requested comments on whether and how a pension plan with a normal retirement age conditioned on the completion of a stated number of years of service satisfies the requirement in §1.401(a)-1 that a pension plan be maintained primarily to provide for the payment of definitely determinable benefits after retirement or attainment of normal retirement age and how such a plan satisfies the pre-ERISA vesting rules.

Although the implementation of the new regulations has been delayed, it is critical to keep apprised of the comments regarding whether a pension plan with a normal retirement age conditioned on the completion of a stated number of years of service satisfies the new regulations. Clearly, the resolution of this issue could drastically impact many public safety officers not only in New Jersey, but across the country. Please be sure to check this blog periodically as updates regarding these regulations will be posted as more information becomes available.

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Civil Service Commission's Denial of Appeal Upheld

Posted on November 4, 2009 by Donald Barbati

 

On November 4, 2009, the Appellate Division decided In the Matter of Michael Curtin, Battalion Fire Chief (PM3593G), Elizabeth, Docket No.: A-4861-07T2. In the case, Michael Curtin appealed from the decision of the former Merit System Board (“Board”), now the New Jersey Civil Service Commission (“Commission”), denying his appeal of the scoring of his promotional examination as well as the Commission’s decision again denying the appeal following remand for consideration of supplemental information.

Curtin is employed by the Elizabeth Fire Department with the rank of captain. He took the Department of Personnel’s examination for the position of battalion fire chief, and received an overall score of 89.270. He was ranked third on the eligible list. He appealed the scoring of the oral portions of the examination to the Board. In a five-page decision dated October 11, 2007, the Board denied the appeal.

Curtis appealed to the Appellate Division. On April 14, 2009, in response to Curtin’s motion to supplement the record, the Appellate Division remanded the matter temporarily to the Commission, which had replaced the Board as of June 30, 2008, for consideration of the arguments raised in Curtin’s motion. Following its review of Curtin’s additional arguments and documents, the Commission issued its remand decision on August 20, 2009, again denying the appeal. As a result, the Court permitted Curtin to supplement his brief on appeal.

The Appellate Division noted that the burden is on a petitioner, not the Commission, when challenging the administration and scoring of examination. Moreover, when reviewing examinations, the Commission shall decide any appeal on the written record or such other proceeding as the Board deems appropriate. Finally, the Court indicated that courts should defer to an agency’s grading of a civil service examination except in the most exceptional of circumstances that disclose a clear abuse of discretion.

Applying these principles, the Court was satisfied that the Commission’s decision on the remand was not arbitrary, capricious, or unreasonable. The Commission duly re-evaluated the Board’s original decision in light of Curtin’s additional arguments and explained its reasons for disagreeing with his position. Moreover, the Court noted that it was not its role to second-guess the Commission with respect to the scoring of civil service examination and this case does not present “the most exceptional of circumstances that disclose a clear abuse of discretion” warranting such interference.

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