Subject: BL-Newsletter: Minimum Distribution Guidance Released; Don't Forget 97-70 Though Date: Wed, 10 Dec 1997 12:40:29 -0500 ................. BenefitsLink Newsletter ............. { { Free, useful information about U.S. tax and labor laws { and new Internet resources, for employee benefit plan { sponsors, service-providers and participants. ......................................................... ================================================================ MORE MINIMUM DISTRIBUTION GUIDANCE IRS Notice 97-75 has been released, providing guidance relating to the amendments to the minimum distribution requirements of section 401(a)(9) of the Internal Revenue Code made by the Small Business Job Protection Act of 1996. Specifically, the notice: * Answers questions regarding the actuarial increase that must be provided under a defined benefit plan for an employee who retires after age 70-1/2, and the interaction of this actuarial increase with section 411. * Coordinates the section 401(a)(4) nondiscrimination requirements with the section 401(a)(9) requirement that certain preretirement distribution options be available to an employee at age 70-1/2. * Permits plans to allow participants who commenced distributions under pre-SBJPA section 401(a)(9) to stop receiving those distributions, and provides guidance on the applicable notice and spousal consent requirements. * Clarifies the extent to which distributions made after 1996 to an employee who has attained age 70-1/2 will be considered eligible rollover distributions under section 402(c)(4)(B). * Gives relief from the direct rollover requirements of section 401(a)(31), the written explanation requirement under section 402(f) and the mandatory 20-percent withholding requirement under section 3405(c) for certain distributions made in 1997. * Provides an optional rule under which an employee's required beginning date under pre-SBJPA section 401(a)(9) may be retained. The Notice can be viewed on BenefitsLink at: http://www.benefitslink.com/IRS/notice97-75.html ================================================================ DECEMBER 31, 1997 DEADLINE FOR CERTAIN PLANS Notice 97-75 does not appear to modify the rules set out by the IRS in Announcement 97-70 earlier this year. That announcement requires some plans to take action before the end of this month. According to Announcement 97-70, if THE TERMS OF A PLAN required the making of a minimum distribution to a person who attained age 70-1/2 during 1996, that distribution should have been made by April 1, 1997. But if that distribution was missed, the Announcement allows that distribution to be made as late as December 31, 1997 without disqualifying the plan, unless the individual is a "5-percent owner" within the meaning of the Code. Or the plan is permitted to obtain the written consent of the participant to skip that minimum distribution (unless the individual is a 5-percent owner), but only if that consent is obtained by December 31, 1997. (The terms of most plans require minimum distributions by April 1 of the calendar year following the calendar year in which a participant attains age 70-1/2, even if the participant is still an employee, because this was the law prior to the Small Business Job Protection Act of 1996.) No action seems to be needed if a particular plan had followed its terms and made the April 1, 1997 minimum distribution in accordance with its terms for a participant who became age 70-1/2 during 1996. Announcement 97-70 is on BenefitsLink at: http://www.benefitslink.com/IRS/ann97-70.html ................. BenefitsLink Newsletter ............... { { To unsubscribe: send email to majordomo@bolis.com { with "UNSUBSCRIBE BL-newsletter" in the text of the email { without the quotation marks. { { To subscribe: send email to majordomo@bolis.com { with "SUBSCRIBE BL-newsletter" in the text of the email { without the quotation marks. { { Your email address is not sold or leased to junk mailers { or any other organization ... no spam, just BenefitsLink! { { To contribute information for publication or to learn { more about sponsoring an issue of the newsletter, please { contact the editor at erisa@benefitslink.com. { { BenefitsLink is the national employee benefits Web site { at http://www.benefitslink.com -- Dave Baker, Editor.