Notice 2009-82

[LIBERTYKID]

The sample plan amendments in the Notice give participants a choice to receive or postpone what would otherwise be a required minimum distribution for 2009. Is the IRS saying that particiants must be given a choice to waive the required minimum distribution or can a plan choose to not give a participant the choice and force out the 2009 distribution as if it was required?

[MSN]

The amendments provided were just samples. If you need to amend a plan, and feel that the sample language is ambiguous or not suitable for your clients, you should draft your amendment in a manner that more clearly states the desired process. I have not read anything that would mandate how individual plan sponsors facilitate the waiver.

[BTG]

LibertyKid, I've been over Notice 2009-82 and commentaries on it several times looking for the answer to that very question, and so far I have come up empty-handed. The closest I've come is the portion of the Notice 2009-82 background section that states "some plans may contain distribution language that satisfies § 401(a)(9) without referencing this Code section and thus, arguably, would not be affected by § 401(a)(9)(H)." The use of "arguably" suggests to me that the IRS recognizes the confusion on this point, but has (frustratingly) declined to decide the issue. The remainder of that paragraph implies that a plan may unilaterally suspend 2009 RMDs or may give participants the choice. However, I haven't seen anything in Notice 2009-82 (or elsewhere) that specifically confirms or denies a plan sponsor's authority to unilaterally decide to continue making 2009 RMDs.

I have a call in to the IRS on this issue and will update this post if I get an answer worth sharing.

[masteff]

Earlier in the year, the discussions here and elsewhere were that plan language might still require the distribution but it would not be a true MRD from the participant... the importance of which being that it would thus be rollover eligible.

[Bird]

It seems the informal comments from IRS people are inconsistent; some are saying that participants must be given a choice and others are saying the plan can decide. There's a sentence in the notice that says:

"The sample amendments can be used by plan sponsors that are uncertain as to the treatment under plan terms of waived required minimum distributions and certain related payments or that otherwise desire to give recipients a choice as to whether to receive such distributions."

The italicized part implies that it is not necessary to give participants a choice, but of course that's not definitive.

"Unfortunate" can't begin to describe the consequences of Congress' decision to "do something" when nothing needed to be done. Now we have all this hassle of figuring out how to handle it, plus we have to do yet another interim amendment.

[katieinny]

What about for plans that don't have anyone in the 70 1/2 and up age bracket? Must those plans still make a choice for the sake of doing more paperwork, or can the entire matter be ignored?

[Guest Scott Foreman]

Katieinny,

I think the answer to your question is that those particular companies can ignore the RMD amendments entirely. Failing to adopt the amendment doesn't affect plan qualification, it only suggests that the plan must follow the terms of the document. If no participants are RMD eligible, it seems like there is no reason to bother with the amendment.

Scott

[katieinny]

Scott: I like that answer. I just don't want an employer to have to go through hoops down to road to prove that there weren't any 70 1/2 year old participants in the plan in 2009 so no election had to be made.

[masteff]

I concur w/ Bird's post above and would also quote the sentence before the one he quoted: "For example, some plans may contain distribution language that satisfies § 401(a)(9) without referencing this Code section and thus, arguably, would not be affected by § 401(a)(9)(H); nevertheless, sponsors of such plans may want to suspend 2009 RMDs." Nearly everytime the IRS uses the words "plan(s) may" it indicates a choice that plan makes and is not mandated.

Further, the introductory paragraphs for each sample start with: "For use by plan sponsors that want to give". I've added emphasis on "want" which is a very different word from "must" (which is an IRS favorite that they don't shy away from).