Normal retirement age is not just a state of mind. For ERISA purposes, it’s the lowest age specified in a pension plan at which a participant may retire without the consent of the employer and still receive retirement benefits.  The IRS has something to say about it since a lower age than the traditional age 65 can accelerate funding.

The IRS issued final rules effective as of May 22, 2007 for employer sponsored plans that clarify that a safe harbor age is 62. However, earlier ages can be used. If a pension plan has a normal retirement age that is between 55 and 62 years, deference will generally be given to a good faith effort to determine the typical retirement age for the industry, as long as that effort is reasonable with respect to the facts and circumstances.

However, a normal retirement age of less than 55 years is presumed to be earlier than would be reasonably representative of the typical industry retirement age for the industry unless facts and circumstances that demonstrate otherwise are presented to the Commissioner. 

And here is one example about why the IRS is concerned about using a lower age to accelerate funding. Depending on funding methods, assumptions, compensation, etc., a 45-year old retiring at age 62 would cost approximately $75,000 but would be approximately $160,000 at age 55. And it’s because of numbers like this, defined benefit plans are alive and well for closely-held companies.