new proposed minimum distributions

[Guest]

have you looked at the new proposed minimum distributions rules!

What simplification!

It doesn't matter who the beneficiary is, you simply use a 10 year difference and recalculate every year. (Of course if spouse is greater than 10 years you can still use the tables, but even if spouse (or beneficiary is less than 10 year difference you can use the 10 year table)

rules effective 1/1/2002 but you can adopt model amendment and use now.

the issue not addressed is what to do if you are already in pay status.

[Guest Bill Knox]

Tom: What is the quickest way to get a copy of whatever material has been issued by IRS or Treasury so far on these new rules. I see nothing yet at Tax Analysts' site. Bill Knox

[Guest]

try

http://www.benefitslink.com/taxregs/1.401a...osed-2001.shtml

[Michael Devault]

Tom, life will be much easier with the proposed regs. A belated Christmas present from the IRS.

In looking at the preamble, it appears that those taking distributions can switch to the new regs. The first paragraph under "Amendment of Qualified Plans" says:

"Alternatively, for distributions for the 2001 and subsequent calendar years beginning before the effective date of final regulations, plan sponsors are permitted, but not required, to follow these proposed regulations in the operation of their plans by adopting the model amendment set forth below."

Am I being too optimistic in reading this sentence?

Mike

[Guest]

I don't know. It could be like what we do for minimum distributions right now - send out a form asking if they would like to switch. (using 10 year difference could result in a smaller distribution, and you would be 'taking' something away to automatically do it. I would never do that)

But I really like the idea of not having to worry about the beneficiary, or date of birth.

[bzorc]

In reading the proposed regs, I see the phrase "Under the new proposed regulations, for the majority of other employees, required minimum distributions would be reduced as a result of the changes". In my opinion, then, it seems as if, for 2001 distributions, the MDIB table can be used for the people already in pay status. Not bad!

[Guest reg_h2b]

One issue that seems more restrictive in the new prop. regs.: the conditions for a sps rollover. There seem to be two new conditons:

1. Sps must be the sole bene.

2. A trust can not be the bene.

It seems (1) clearly changes (or as the service would say "clarifies") old prop. reg 408-8 A-4(B). That old p.reg. clearly states "the beneficiaries entire interest in" .... the IRA. It says nothing about sole beneficiary.

Furthermore, there have been many PLR's throughtout the 90's that clearly define the IRS's logic for rollover involving a trust as bene. and or sps rollovers where there are multiple primaries.

My concern is with sps rollovers with a trust as bene that have already been completed before these new prop. regs. and that have not already received a PLR.

Thoughts?

[smm]

Perhaps I've missed this, but the regs. permit a participant who has a spouse that is more than 10 years younger than him (or her) to use the joint life expectancy tables instead of the new "single" table for all participants. Does such a participant still have the option of recalculating his/her life expectancy or does it mater anymore. What about the spouse.

[Michael Devault]

In response to ssm's question, since the table in the new regs is based on recaculated life expectancies of the employee and a beneficiary 10 years younger, it would seem that the new special rule for a spouse more than 10 years younger would use the same recalculation process.

That raises another, related question: If the spouse is more than 10 years younger, is recalculation mandatory?

[Guest]

somewhere in the new regs is the exception if the spouse is more than 10 years younger so you can continue to use whatever method you were doing

[smm]

Does this mean that if a spouse is 15 years younger than the participant, I can, (a) recalculte the participant's life expectancy, (B) recalculate the spous's life expectancy, or © both? If so, does it matter anymore? I have to read the regs again (who doesn't), but I thought it said that even if a participant's life expectancy is recalculated, it is no longer reduced to 0 if he dies. I may be mixing up a few things, but any guidance would be helpful.

[Guest SBlack]

What about those already in pay status? I realize that the proposed regs are effective January 1, 2002, but it goes on to say that you are permitted to follow for distributions in 2001. Even the examples are based on someone who turns 70 1/2 in 2002 or they speak to ending account balances. We can make some assumptions based on Examples (ii) and (iii), but the auditor in me wants hard evidence. Maybe I just missed it when I was reading the regs - since I fell asleep -

[card]

Has anyone seen anything from the Service indicating how these new rules impact section 72(t) substantially equal periodic payment calculations (if at all)? My guess is that it would not be the Service's intent to require the use of the new rules to require slower distributions under 72(t). The most likely solution is to allow either the new rules or the old rules for 72(t) calculations.

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