Stretch IRAs and the new rules

[Guest Jeanne]

My company is composing a letter for our shareholders who attained age 70 1/2 this year and are required to begin taking their RMDs by 4/1/02. Someone sneaked the following Q & A in and I am not sure it is entrely correct:

Has the timeframe changed for when I need to begin taking RMDs?

The new proposed regulations have not changed the timeframe. If you have an IRA or participate in a Qualified Retirement Plan, you must start taking distributions no later than your required beginning date, and continue to take distributions over a period that does not extend beyond either (1) your life expectancy or (2) your life expectancy and that of your designated beneficiary.

After reading UPI's materials (I was not the one to attend the recent conference this month), I understand that the old rules still apply for beneficiaries inheriting an IRA before RBD, correct?

What about AFTER RBD? Can't the benficiaries in turn stretch out the IRA to THEIR beneificiaries? Does that make the point in the Q & A above incorrect?

Please help!

[Mary Kay Foss]

The answer you're concerned about comes from the Internal Revenue Code and is not changed by the regulations.

A beneficiary can still not name a new beneficiary to extend distributions past their life expectancy. Only a surviving spouse can do that through a rollover.

With the new regs. a nonspouse beneficiary takes payments over their life expectancy whether the death occurs before or after the RBD.