['Retirement Benefits']
['Minimum Required Distribution']
05/16/2022
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These frequently asked questions and answers are provided for general information only and should not be cited as any type of legal authority. They are designed to provide the user with information required to respond to general inquiries. Due to the uniqueness and complexities of Federal tax law, it is imperative to ensure a full understanding of the specific question presented, and to perform the requisite research to ensure a correct response is provided.
Are there new rules for calculating required minimum distribution form qualified retirement plans and individual retirement arrangements (IRAs)?
Yes. New 2002 final and temporary regulations (2002 final regulations) [www.irs.gov/pub/irs-irbs/irb02-19.pdf] were published in the Federal Register on April 17, 2002. They incorporate, with several modifications, the proposed regulations that were published in the Federal Register on January 19, 2001, and in the Internal Revenue Bulletin (2001-11, page 865) [www.irs.gov/pub/irs-irbs/irb01-11.pdf] on March 12, 2001.
Where can I find the 2002 final regulations?
The 2002 final regulations will also be published shortly in the Internal Revenue Bulletin. In addition, Notice 2002-27, 2002-18 I.R.B. 814 [www.irs.gov/pub/irs-irbs/irb02-18.pdf] provides guidance on the reporting required from trustees, custodians, and issuers of IRAs with respect to required minimum distributions (see Q14, Q15 and Q16). A revenue procedure to be issued shortly will provide guidance on amending qualified plans to comply with the 2002 final regulations (see Q3).
When must a qualified retirement plan be amended to comply with the 2002 final regulations?
Most qualified retirement plans must be amended to comply with the 2002 final regulations under section 401(a)(9). A revenue procedure to be issued shortly will provide guidance on plan amendments. Determination letter applications for individually designed plans filed on or after the first day of the first plan year beginning on or after January 1, 2003 will be reviewed for compliance with the 2002 final regulations.
When is the effective date of the 2002 final regulations?
The 2002 final regulations are used for determining required minimum distributions for calendar years beginning on or after January 1, 2003. For determining required minimum distributions for calendar year 2002, taxpayers may use the 2002 final regulations, the 2001 proposed regulations, or the 1987 proposed regulations.
Have the mortality tables for calculating lifetime and after death required minimum distributions changed under the 2002 final regulations?
Yes. The mortality tables have been modified to reflect current life expectancy. The 2002 final regulations have adopted new tables of life expectancies for determining required minimum distributions. These new tables are used to determine an employee's or IRA owner's life expectancy under the single life table and the uniform lifetime table. New tables are also used to determine the joint life and last survivor expectancy of an employee or IRA owner and the designated beneficiary.
Has the date for the determination of a designated beneficiary changed?
Yes. The date for determining the designated beneficiary has been changed to September 30 of the year following the year of the employee's or IRA holder's death. The designated beneficiary determination date has been changed from the end of the year following the year of the employee's or IRA holder's death in order to provide adequate time to calculate and distribute the required minimum amount by the end of the year following the year of death.
If an individual who is a designated beneficiary dies after the death of the employee or IRA holder but before September 30 of the year following the year of the employee's or IRA holder's death and there is a successor beneficiary entitled to distributions, what is the distribution period for required minimum distributions after the employee's death?
The deceased beneficiary continues to be treated as the designated beneficiary for purposes of determining the distribution period for required minimum distributions, even though the successor beneficiary is entitled to receive distributions from a plan or IRA.
Can a designated beneficiary disclaim entitlement to a benefit?
Yes. Any person who was a beneficiary as of the date of the employee's death, but is not a beneficiary as of September 30 of the calendar year following the calendar year of the employee's death is not taken into account in determining the employee's designated beneficiary for purposes of determining the distribution period for required minimum distributions after the employee's death. If a person disclaims entitlement to the employee's benefit pursuant to a disclaimer that satisfies Code section 2518 by that September 30, the disclaiming person is not treated as a designated beneficiary.
If the employee's estate is named as the beneficiary of the employee, will the beneficiary of the estate be treated as having been designated as the beneficiary of the employee under the plan for purposes of determining the distribution period under section 401(a)(9)?
No. The period between the death of the employee and the beneficiary determination date is a period during which beneficiaries can be eliminated but not replaced with a beneficiary not designated under the plan as of the date of death. In order for an individual to be a designated beneficiary, the individual must be designated under the plan or named by the employee as of the date of death.
What clarifications have been made to the multiple beneficiary rule?
If there are multiple beneficiaries, the life expectancy of the oldest beneficiary will be used as the distribution period for purposes of determining required minimum distributions.
A person who has a right to an employee's benefit as only a potential successor to the interest of one of the employee's beneficiaries upon that first beneficiary's death is not considered a beneficiary.
The 2002 final regulations clarify that this rule does not apply to a person who has any right to an employee's benefit beyond a mere potential successor to the interest of one of the employee's beneficiaries upon the death of that beneficiary. Thus, if a beneficiary has an income interest in a deceased's IRA and a second beneficiary has the remainder interest, the second beneficiary's life expectancy must be considered in determining who are the deceased - designated beneficiaries.
Can a beneficiary who is receiving distributions under the 5-year rule of the 1987 proposed regulations switch to the life expectancy rule?
Yes. The 2002 final regulations permit a beneficiary subject to the 5-year rule under the 1987 proposed regulations to switch to the life expectancy rule if all amounts that would have been required to be distributed under the life expectancy rule are distributed by the earlier of December 31, 2003, or the end of the 5-year period following the year of the employee's death.
Have all of the 2001 proposed section 401(a)(9) regulations been finalized?
No. Section 1.401(a)(9)-6T of the regulations governing defined benefit plans and annuities has been issued as temporary and proposed regulations in order to allow taxpayers to comment on changes made in them to reflect new product designs.
When can an employee's account be divided into separate accounts so that each separate account may separately satisfy section 401(a)(9) following the employee's death?
Separate accounts with different beneficiaries can be established any time. The separate accounting must allocate all post-death investment gains and losses on a pro rata basis between the different accounts until the separate accounts are established. The required minimum distribution rules will be applied separately to each separate account for years subsequent to the calendar year that the separate accounts are established.
The separate accounts must be established by the end of the year following the year of the employee's death in order to permit the distribution period for a separate account to distinct beneficiaries to be determined without regard to the beneficiaries of the other separate accounts.
Must required minimum distributions from IRAs be reported to IRA owners?
Beginning with required minimum distributions for calendar year 2003, IRA trustees, custodians, and issuers must provide information relating to lifetime required minimum distributions to IRA owners by January 31. Thus, the first report will be due January 31, 2003, alerting IRA owners to the distribution they must take for 2003. The IRA trustee must either provide the IRA owner with the amount of the required minimum distribution, or offer to provide the IRA owner, upon request, with the amount of the required minimum distribution. See Notice 2002-27 for further information. [www.irs.gov/pub/irs-irbs/irb02-18.pdf]
Must required minimum distributions from IRAs be reported to the IRS?
No. However, beginning with required minimum distributions for calendar year 2004, the fact that a minimum distribution is required with respect to an IRA for a year must be reported by the IRA trustee to the IRS on Form 5498. The trustee does not report the amount of the required minimum distribution on Form 5498.
Must required minimum distributions with respect to IRAs of deceased owners or with respect to section 403(b) contracts be reported?
No, not at this time.
SOURCE: www.irs.gov/retirement/article/0,,id=96989,00.html
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