IRS Notice 2009-82 – Guidance on 2009 Required Minimum Distributions

Part III --- Administrative, Miscellaneous, and Procedural

IRS Notice 2009-82 – Guidance on 2009 Required Minimum Distributions

Guidance on 2009 required minimum distributions. This notice provides guidance and transition relief relating to the waiver of 2009 required minimum distributions, described in section 401(a)(9) of the Code, from certain plans under the Worker, Retiree, and Employer Recovery Act of 2008 ("WRERA"), P.L. 110-458. The notice also provides two sample plan amendments that give recipients a choice as to whether to receive waived required minimum distributions and certain related payments and that specify the application of the direct rollover rules to the distributions. 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. Notice 2007-7 modified.

Notice 2009-82 explains that those who have received a 2009 required minimum distribution have until the later of Nov. 30 2009, or 60 days after the date the distribution was received to roll it over. The notice also provides guidance for retirement plan sponsors.

Waived Required Minimum Distributions for 2009

WASHINGTON ― The Internal Revenue Service today provided guidance for retirement plan administrators, plan participants and retirees regarding recent legislation affecting required minimum distributions. The Worker, Retiree, and Employer Recovery Act of 2008 waives required minimum distributions for 2009 from certain retirement plans.

Generally, a required minimum distribution is the smallest annual amount that must be withdrawn from an IRA or an employer’s plan beginning with the year the account owner reaches age 70½. The 2008 law waives required minimum distributions for 2009 for IRSs and defined contribution plans (such as 401(k)s) and allows certain amounts distributed as 2009 required minimum distributions to be rolled over into an IRA or another retirement plan.

Notice 2009-82 provides relief for people who have already received a 2009 required minimum distribution this year. Individuals generally have until the later of Nov. 30, 2009, or 60 days after the date the distribution was received, to roll over the distribution.

The notice also provides guidance for retirement plan sponsors. It contains two sample plan amendments that plan sponsors may adopt or use to amend their plans to either stop or continue 2009 required minimum distributions. Both sample amendments provide that participants and beneficiaries can choose to receive or not to receive 2009 required minimum distributions. Also, both sample amendments allow the employer to offer direct rollover options of certain 2009 required minimum distributions.

Plan sponsors may need to tailor the sample amendment to their plan’s particular terms and administration procedures and must adopt the amendment no later than the last day of the first plan year beginning on or after Jan. 1, 2011 (Jan. 1, 2012 for governmental plans).

IRS Provides 2009 RMD Guidance discusses how the Notice defined two new terms:

• 2009 RMDs. These are Required Minimum Distributions which a plan would have been required to distribute (or an IRA owner or beneficiary would have been required to take), if Congress had not adopted WRERA. It includes all RMDs for the 2009 distribution calendar year, including those which could otherwise be distributed as late as April 1, 2010.
  
  
• Extended 2009 RMDs. These are one or more payments in a series of substantially equal distributions (that include the 2009 RMDs) made at least annually and expected to last for the life/life expectancy of the participant, or the joint lives/life expectancy of the participant and a designated beneficiary, or for a period of at least 10 years. This definition is significant because an individual cannot normally roll over one or more of a series of substantially equal distributions, as described in the previous sentence, whether or not those distributions are RMDs. For example, if a plan distributes a participant’s benefit in 15 equal annual installments, the distributions are not eligible rollover distributions (ERDs), without regard to the RMD rules.

RMD Guidance Issued by the IRS for 2009 highlights a Q&A section that addressed issues from the public:

• The deadline for an employee or a beneficiary that had until the end of 2009 to choose between receiving distributions under the 5-year or the life expectancy rule is extended until the end of 2010.
  
  
• In plans that permit a nonspouse designated beneficiary to directly roll over a deceased participant’s account balance, the special rule in Notice 2007-7 is modified so that, if the employee died in 2008, the nonspouse designated beneficiary has until the end of 2010 to make the direct rollover and use the life expectancy rule.
  
  
• Only for 2009, if an individual receives a plan distribution that includes a 2009 RMD, the portion of the distribution that represents the 2009 waived RMD is subject to the optional 10% withholding rules under §3405(b) and any remaining portion is subject to the 20% mandatory withholding rule of §3405(c) (assuming the distribution otherwise qualifies as an ERD). Any distributions made in 2009 are deemed to consist first of any undistributed RMDs from prior years followed by 2009 RMDs.
  

Related Links:

• IRS Notice 2009-82, 2009-41 I.R.B. 491 (October 13, 2009) – Guidance on 2009 Required Minimum Distributions [PDF]
• IRS Notice 2009-82, 2009-41 I.R.B. 491 (October 13, 2009) – Guidance on 2009 Required Minimum Distributions [HTML]
• 2009-41 I.R.B. 491 (October 13, 2009)
  
  
• IRS Notice 2007-07 - Miscellaneous Pension Protection Act Changes
  
  
• H.R. 7327: Worker, Retiree, and Employer Recovery Act of 2008 (WRERA) / Required Minimum Distributions (RMDs)
• Retirement News for Employers - Special Edition, January 2009