At a recent Q&A session, it was asked if a LOSAP participant could be paid at a younger age. Unfortunately, the answer is that the lowest the entitlement age can be under New York State law is age 55. Here is the statute:
“Entitlement age” means the age designated by the sponsor at which a program participant is entitled to begin receiving an unreduced service award. In no event shall the entitlement age under a program be earlier than age fifty-five nor later than the age at which the participant can receive an unreduced benefit under Title II of the Social Security Act (Public Law 74-271 U.S.C. 306 et seq.). No service award program may provide for the payment of benefits (except in the case of death or disability) before age fifty-five.
The statute is clear – the earliest the entitlement age can be is age 55.
The latest the entitlement age can be is based on the age at which full retirement benefits are available under Social Security. That is age 66 for anyone born before 1955, and then gradually increases to age 67 for anyone born in 1960 or later. Typically a LOSAP is designed to name one specific entitlement age for all participants. That is different from Social Security or other retirement plans that designate when the full benefit is payable (usually called normal retirement age), but allows a participant to elect to be paid a reduced benefit prior to normal retirement age.
Therefore, in the context where there is just one set entitlement age with no possibility of “early entitlement”, the latest an entitlement age could be using a whole age (without months) is age 66, since all possible participants would have to have an entitlement age at or under their SSA full retirement age. A LOSAP couldn’t be designed with an entitlement age of 67 until at least 2027, which is when someone born in 1960 turns 67. If a LOSAP was designed to have an entitlement age of 67 in 2025, the above statute would be violated for someone born in 1958 – that person has a SSA full retirement age of 66 years and 8 months, which is obviously before age 67.
In my 20+ year career in LOSAP here in New York, I’ve never seen a plan designed with an entitlement age over age 65.
If a LOSAP was designed with an entitlement age of 65, could it be designed to allow a participant to elect a reduced benefit as early as age 55? The above statute implies it could, but there are taxation complications that must be considered. This topic will be discussed in a future post.
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