Subject: Newsletter: Persons Turning 70-1/2 in 1996: 4/1/97 Minimum Distributions?
Date: Mon, 10 Mar 1997 12:10:40 -0500

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PLAN CAN ALLOW PARTICIPANT WHO TURNED 70-1/2 IN 1996
OPPORTUNITY TO DEFER UPCOMING APRIL 1 "MINIMUM DISTRIBUTION"
OTHERWISE REQUIRED BY PLAN DOCUMENT
_____________________________________________________________
IRS Announcement 97-24 (3/3/97) provides that an employer is not
precluded from offering, to employees (other than 5-percent
owners) who attain age 70-1/2 in 1996 and have not retired, an
option to refuse in-service minimum distribution payments
otherwise required under the terms of the plan.

The full text of the announcement is on BenefitsLink, at

   http://www.benefitslink.com/IRS/97-24.html

An earlier IRS Notice (96-67) already clarified the effective
date of the recent legislative changes to persons (other than
5-percent owners) who attain age 70-1/2 in 1996 but had not
retired from employment with the employer maintaining the plan by
the end of 1996 ... such an employee's "required beginning date"
is not April 1, 1997.  Instead, the employee's required beginning
date is April 1 of the calendar year following the year in which
the employee retires from employment with the employer
maintaining the plan. (Q&A 2, IRS Notice 96-67.)

The full text of that notice also is on BenefitsLink, at

   http://www.benefitslink.com/IRS/96-67.html

The recent announcement means that an employer is not required to
hurry and amend its plan by April 1 if it wishes to ALLOW such
an employee the OPTION to defer an upcoming distribution that
otherwise is required under the plan's current language.

But the announcement does not permit an employer to REQUIRE that
such an employee defer the distribution.  "Anti-cutback" concerns
under Code section 411(d)(6) are cited as the reason.

Hence a plan probably should continue to process minimum
distribution payments by April 1 for those persons who attained
age 70-1/2 during 1996, unless the plan administrator decides to
provide such employees with the opportunity to defer payment
(which, on balance, might not be worth the trouble).

If you would like to participate in a discussion of the IRS
announcement, please join us on BenefitsLink's Retirement Plans
message board (free).  Look for the Message Boards link on the
BenefitsLink home page at

   http://www.benefitslink.com

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