Notice 2002-27 - IRA Required Minimum Distribution Reporting

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Notice 2003-2; 2003-1 C.B. 257;
2002 IRB LEXIS 572, *; 2003-2 I.R.B. 257
Notice 2003-2
Notice 2003-2; 2003-1 C.B. 257; 2002 IRB LEXIS 572; 2003-2 I.R.B. 257
January 2003
[*1]
SUBJECT MATTER: Required Minimum Distributions for Defined Benefit Plans and Annuity Contracts
TEXT:
PURPOSE
The Internal Revenue Service and Treasury Department intend to issue regulations that will provide
further guidance on the minimum distribution requirements of § 401 (a) (9) of the Internal Revenue
Code for defined benefit plans and annuity contracts. In particular, it is anticipated that the regulations
will contain a transition rule permitting plans to satisfy certain requirements set forth in proposed
regulations under § 401 (a) (9) issued prior to 2002 in lieu of complying with the requirements in A-1
of § 1.401 (a) (9)-6T of the Temporary Income Tax Regulations. Further, it is anticipated that the
regulations will contain a transition rule permitting the entire interest under an annuity contract to be
determined without taking into account the value of certain benefits that would be required to be taken
into account under A-12 of § 1.401 (a) (9)-6T. Finally, it is anticipated that the regulations will provide
that governmental plans must comply with the regulations as of a special effective date described
below and will provide transitional relief for the period before the special effective date. [*2] The
Service and Treasury invite comments on these issues before regulations are issued.
BACKGROUND
Section 401 (a) (9) provides rules for required minimum distributions from retirement plans qualified
under §§ 401 (a) and 403 (a). These rules are incorporated by reference in § 408 (a) (6) and (b) (3)
for distributions from individual retirement arrangements ("IRAs") (including Roth IRAs with respect to
distributions paid following the death of the Roth IRA owner), § 403 (b) (10) for distributions from §
403 (b) annuity contracts, and § 457 (d) for distributions from eligible deferred compensation plans.
Final and temporary regulations relating to required minimum distributions under Code § 401 (a) (9)
(§§ 1.401 (a) (9)-1 through 1.401 (a) (9)-5, § 1.401 (a) (9)-6T, and §§ 1.401 (a) (9)-7 through 1.401
(a) (9)-9) were issued on April 17, 2002 (T.D. 8987, 2002-19 I.R.B. 852 [67 FR 18987]). A-2 of §
1.401 (a) (9)-1 provides that the final and temporary regulations (including § 1.401 (a) (9)-6T) apply
for determining required minimum distributions for calendar years beginning on or after January 1,
2003. The preamble to those regulations provides that, for determining required minimum distributions
for [*3] calendar year 2002, taxpayers may rely on the final and temporary regulations, the 2001
proposed regulations, or the 1987 proposed regulations. (The 1987 proposed regulations were
published in the Federal Register on July 27, 1987 (EE-113-82, 1987-2 C.B. 881 [52 FR 28070]) and
the 2001 proposed regulations were published in the Federal Register on January 17, 2001 (REG130477-00; REG-130481-00, 2001-1 C.B. 865 [66 FR 3928]).) Notice 2002-27, 2002-18 I.R.B.
814, sets forth reporting requirements with respect to required minimum distributions from IRAs.
Section 1.401 (a) (9)-6T was issued as a temporary and proposed regulation in order to allow
taxpayers to comment on changes made to the rules applicable to defined benefit plans and annuity
contracts. The Service received numerous comments relating to the new restrictions on variable
annuity payments, and certain other increasing annuity payments, set forth in A-1 of § 1.401 (a) (9)6T. Commentators also requested additional guidance in applying the rule in A-12 of § 1.401 (a) (9)-6T
that requires the entire interest under an annuity contract to include the actuarial value of other

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benefits (such as minimum survivor benefits) provided under [*4] the contract and that the rule
requiring the inclusion of these values (including inclusion in the required reporting to the IRA holder
under Notice 2002-27) be delayed until the guidance is provided. Finally, commentators requested
that special consideration be provided to governmental plans.
ANTICIPATED REGULATORY PROVISIONS
In order to allow further time for the Service and Treasury to fully consider the issues raised in
comments with respect to the new restrictions on variable annuity payments, and certain other
increasing annuity payments, set forth in A-1 of § 1.401 (a) (9)-6T, and to prevent employers from
being required to make changes to their plans until this additional consideration is completed, it is
expected that future regulations will provide a transition rule for annuity payments. This transition rule
is expected to apply at least through the end of the calendar year final regulations are published and is
expected to provide that distributions paid under a defined benefit plan or annuity contract (including
an annuity described in § 408 (b) or § 403 (b)) that satisfy the requirements of A-1 of § 1.401 (a) (9)6 of the 2001 proposed regulations or F-3 and F-3A of § 1.401 (a) (9)-1 [*5] of the 1987 proposed
regulations, will be deemed to satisfy the requirements of A-1 of § 1.401 (a) (9)-6T.
In addition, to allow further time for the Service and Treasury to fully consider the issues raised in
comments with respect to the rule in A-12 of § 1.401 (a) (9)-6T that requires the entire interest under
an annuity contract to include the actuarial value of other benefits (such as minimum survivor benefits)
provided under the contract and to prevent employers from being required to make changes to their
plans until this additional consideration is completed, it is expected that future regulations will provide a
transition rule for the determination of the value of annuity contracts. This transition rule is expected to
apply at least through the end of the calendar year final regulations are published and is expected to
provide that, for purposes of A-12 of § 1.401 (a) (9)-6T, the entire interest under an annuity contract
(including an annuity described in § 408 (b) or § 403 (b)) is permitted to be determined as the dollar
amount credited to the employee or beneficiary under the annuity contract without regard to the
actuarial value of any other benefits (such as minimum survivor [*6] benefits) that will be provided
under the contract.
Finally, in order to allow further time for the Service and Treasury to fully consider the issues raised in
comments with respect to whether and to what extent special consideration should be provided to
governmental plans, it is expected that future regulations will provide a special effective date for
governmental plans for § 1.401 (a) (9)-6T (or any regulation that supersedes or replaces § 1.401 (a)
(9)-6T). The special effective date is not expected to be earlier than the first calendar year beginning
after the later of (1) the calendar year in which the final regulations are published or (2) 90 days after
the opening of the first legislative session, beginning on or after the date the final regulations are
published, of the governing body with authority to amend the plan, if that body does not meet
continuously. For purposes of this paragraph, the governing body with authority to amend the plan is
the legislature, board, commission, council, or other governing body with authority to amend the plan.
In addition, it is expected that the future regulations will provide a transitional rule for the period
before the special effective [*7] date that will permit a governmental plan to rely on a reasonable
good faith interpretation of § 401 (a) (9) as it applies to defined benefit plans and annuity contracts.
Compliance with § 1.401 (a) (9)-6T, the 2001 proposed regulations, or the 1987 proposed regulations,
as they relate to defined benefit plans and annuity contracts, will be deemed to meet this reasonable
good faith standard.
RELIANCE
The IRS and Treasury anticipate issuing the regulations described in this notice in 2003. In the
meantime, taxpayers may rely on the transition rules described in this notice. Except as described
above, taxpayers are required to comply with the final and temporary regulations (including § 1.401 (a)
(9)-6T) for purposes of determining required minimum distributions for calendar years beginning on or
after January 1, 2003.
For purposes of determining the amount of the required minimum distribution with respect to an IRA
for purposes of reporting to the IRA owner under Notice 2002-27, trustees may rely on the transition
rule described above for A-12 of § 1.401 (a) (9)-6T. Thus, in the case of an annuity contract under an

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IRA from which annuity payments have not commenced on an irrevocable basis [*8] (except for
acceleration), the IRA trustee may determine the entire interest under the annuity contract as the
dollar amount credited to the employee or beneficiary under the annuity contract without regard to the
actuarial value of any other benefits (such as minimum survivor benefits) that will be provided under
the contract. The relief provided in this paragraph will continue to be available at least through the end
of the calendar year in which final regulations regarding required minimum distributions under a
defined benefit plan or annuity contract are issued. Otherwise, the reporting requirements set forth in
Notice 2002-27 continue to apply.
COMMENTS REQUESTED
The Service and Treasury invite comments on the issues identified in this notice. Comments should be
submitted by March 1, 2003, in writing, and should reference Notice 2003-2.
Comments may be submitted to CC:ITA:RU (Notice 2003-2), room 5226, Internal Revenue Service,
POB 7604 Ben Franklin Station, Washington, DC 20044. Comments may be hand delivered between the
hours of 8 a.m. and 4 p.m. CC:ITA:RU (Notice 2003-2), Courier's Desk, Internal Revenue Building,
1111 Constitution Avenue NW, Washington, D.C. Alternatively, comments [*9] may be submitted via
the Internet at [email protected]. All comments will be available for public
inspection and copying.
DRAFTING INFORMATION
The principal authors of this notice are Roger Kuehnle of Employee Plans (Tax Exempt and Government
Entities Division) and Cathy Vohs of the Office of the Division Counsel/Associate Chief Counsel (Tax
Exempt and Government Entities). For further information regarding this notice, please contact the
Employee Plans taxpayer assistance telephone service (between the hours of 8:00 a.m. and 6:30 p.m.
Eastern Time, Monday through Friday) at 1-877-829-5500 (a toll-free number). Mr. Kuehnle may be
reached at 202-283-9888 (not a toll-free number) Ms. Vohs may be reached at 202-622-6090 (not a
toll-free number).
Source: IRS Cumulative Bulletin and Internal Revenue Bulletin
View: Full
Date/Time: Tuesday, July 5, 2011 - 4:17 PM EDT
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