242(b) election

[NQS]

Because I have heard that the IRS is fairly stringent regarding the validity of 242(b) elections, I am hesitant about giving the go-ahead on a particular one.

The participant signed a 242(b) TEFRA election 12/29/83. He turned 70 ½ this year, 2013. My question is whether his election meets the requirements of 242(b) regarding “the time at which the distribution will commence”.

The 242(b) signed form says:

“ I elect that benefits be paid to me at the latest age at which such benefit will not cause this election to violate Section 401(a)(9) of the Internal Revenue Code of 1954, as amended, (“Code”) and as in effect immediately prior to the effective date of the Tax Equity and Fiscal Responsibility Act of 1982, (“TEFRA”). “

Although I am not sure this is relevant, the client's last pre-TEFRA document (1981) defines the latest commencement date for the payment of retirement benefits as the later of the date the Participant attained the Normal Retirement Date or the date the participant terminated employment.

Is the above a valid 242(b) election regarding the time at which a distribution will commence?

[Bird]

Off the top of my head, I thought they had to be specific about when the benefits would commence. That's pretty vague.

[Bird]

Yeah, I looked it up in an old but reliable book and it says the designation must have specified the start date, payment method, term, and death beneficiaries. Notice 83-23.

I doubt that many of those elections really are/were valid, but this one sounds particularly weak.

[NQS]

Perhaps, my question wasn’t clear.

I was only concerned about the time at which distributions commence as stated on the participant’s 242b election form. I believe the participant’s form satisfies the other requirements of Notice 83-23 regarding 242(b) election forms (the method of distribution, etc.)

My understanding is that under 401(a)(9) of the I.R.C.as in effect immediately prior to TEFRA, required minimum distributions could be deferred until the later of age 70 ½ or retirement.

The participant signed a 242(b) TEFRA election in 1983 that included the following language: “ I elect that benefits be paid to me at the latest age at which such benefit will not cause this election to violate Section 401(a)(9) of the Internal Revenue Code of 1954, as amended, (“Code”) and as in effect immediately prior to the effective date of the Tax Equity and Fiscal Responsibility Act of 1982, (“TEFRA”). “

The above election, I believe satisfies the 242(b) requirement regarding the time at which the distribution will commence, although indirectly by reference to the Code.

Does anyone disagree?

Thank you