- Are there new rules for calculating required
minimum distributions from qualified retirement plans and
individual retirement arrangements (IRAs)?
- Where can I find the 2002 final regulations?
- When must a qualified retirement plan be
amended to comply with the 2002 final regulations?
- When is the effective date of the 2002 final
regulations?
- Have the mortality tables for calculating
lifetime and after death required minimum distributions
changed under the 2002 final regulations?
- Has the date for the determination of a
designated beneficiary changed?
- 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 holderīs death and there is a successor
beneficiary entitled to distributions, what is the
distribution period for required minimum distributions after
the employee's death?
- Can a designated beneficiary disclaim
entitlement to a benefit?
- 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)?
- What clarifications have been made to the
multiple beneficiary rule?
- Can a beneficiary who is receiving
distributions under the 5-year rule of the 1987 proposed
regulations switch to the life expectancy rule?
- Have all of the 2001 proposed section
401(a)(9) regulations been finalized?
- 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?
- Must required minimum distributions from
IRAs be reported to IRA owners?
- Must required minimum distributions from
IRAs be reported to the IRS?
- Must required minimum distributions with
respect to IRAs of deceased owners or with respect to section
403(b) contracts be reported?
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)
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) on March 12, 2001.
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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 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).
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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