Electric cooperatives understand the realities of the tight market for skilled labor in rural America, and value long service employees. Co-op employees are older on average than the rest of the workforce, and co-ops are facing very real skilled labor and management shortages in the next decade as so many of our folks will hit their retirement plan's "normal retirement age" (NRA).
Thirty years of benefit service is a very typical NRA for co-op employees, since many work the vast majority of their time in the physically demanding and dangerous environment of climbing energized power line poles, working out of a bucket truck, installing transformers and other line equipment, and loading and unloading heavy materials.
To prevent co-ops from losing their most valuable employees to retirement, the NRECA Retirement Security (RS) Plan permits employees to "quasi-retire" - that is, receive "in service" distributions at the plan's NRA - including 30 years of benefit service.
Without this feature, many needed employees would be forced to retire in order to obtain the Plan's most valuable benefit. This would drive critical long-service employees from the workforce and deprive co-ops of their most valuable assets. This feature is a win-win for cooperatives and employees, and has been a part of the RS Plan for 25 years.
A few years ago, some “cash balance plans” utilized a new technique to make as little as 5 years of service an NRA. We agree with the IRS that such plans are an abuse of the tax system. Unfortunately, the May 21, 2007 IRS Regulation designed to prohibit this abuse sweeps too broadly and has a devastating effect on long-service co-op employees.
The regulation presumes all NRAs under age 55 to be invalid (unless specifically approved by the IRS), regardless of how long an employee has worked. The regulation thus could retroactively take these earned retirement benefits away from long service employees. Even with the IRS' temporary relief from its own Regulation (through Notice 2007-69 on August 10, 2007), the retirement benefits of nearly 20,000 employees at 340 electric co-ops throughout the country hang in the balance as the IRS begins an uncharted, ill-conceived and undefined process to determine what is and what is not a valid NRA for this purpose.
Retirement benefits that have been properly funded for decades by electric cooperatives and have been earned by employees over that time should not now all of a sudden be jeopardized because of a regulatory overreach by the IRS. Congress should ensure that older electric cooperative employees will not be forced to retire earlier than they had planned or wanted to in order to preserve their earned retirement benefits. We think this would be an impossible choice for employees.