Participant can calculate Required Minimum Distribution under new rule

[John A]

Does anyone else think the new simplified rules for Required Minimum Distributions just got confusing for 2001? The IRS seems to have clarified that plan participants can use the new rules to calculate the amount of their Required Minimum Distribution (RMD) despite the plan not being amended to use the new rules for 2001. In that case, why not just make the rules effective for 2001? Does the plan sponsor have any obligation to calculate the RMD under the new rules and inform the participant that the participant is allowed to use those rules even though the plan did not? Does it make any sense that the plan would not have to do 20% withholding but the participant could roll over the amount of the difference? Should TPAs just have every plan sponsor adopt the amendment to avoid any confusion?

[Bill Berke]

I think that the Plan Administrator/sponsor has the obligation to inform the employees that they can elect under the new rules even though the plan has not been amended. We have circuit court cases that say that once an amendement is under serious consideration, the affected employees must be informed even though the plan has not yet formally adopted it. And what plan wouldn't adopt this amendment at least retroactively, if not currently? What emplyee would turn down the recalculation if properly informed? We are throwing it into all our GUST restatements

[KJohnson]

John A. What guidance are you referring to. I know there was a correction to the model amendment, but is there something else?

[John A]

KJohnson, sorry - guidance was the wrong word. I was referring to an article in RIA's Pension & Benefits Week that said that an IRS had confirmed the above when RIA asked about it. The part about being able to roll over any amount in excess of the RMD was confirmed in IRS Announcement 2001-23, but then hasn't that always been true?

I should have indicated my source in my original post - again, sorry about that.

Since the clarification is verbal rather than written, does that change your reaction to what a TPA should advise clients?