Expert: Allen - 2/17/2008

Question
My father turns 70 1/2 on May 11, 2008, and he is still actively working for the company from which he has earned the pension.  He seemed to believe that he can start drawing his pension this year, possibly June.  The Retirement Center for the company is telling him that he HAS to wait until April 1st of 2009 when he will almost be 71 1/2.  What is the truth when it comes to the Federal Law that states something about drawing your pension at 70 1/2, and how can a corporation manipulate and change the requirement of Federal Law????  I understand that you can postpone payment up until the April of the following year, but how can the COMPANY make that decision for you when you wish to draw it at 70 1/2 like the law states. He has been trying to get to the bottom of this for weeks, and has run in circles.  Anything you can add is greatly appreciated.  Thanks

Answer
There are two separate issues.

The time when distributions start is governed by the plan document. Some plans require an employee to formally terminate before distributions can start. This appears to be the case with the plan your father participates in.

Federal law requires that if someone is NO LONGER WORKING distributions must commence by April 1 following the year in which he reaches age 70 years and 6 months. Distributions to a participant who is not an owner of the company do not have to begin until he stops working.

You can ask the administrator for the plan to provide you with a copy of the Summary Plan Description for the plan. This should state when distributions begin.