4078 / What minimum distributions must be made under Section 401(a)(9) from a tax sheltered annuity during the life of the participant?

If a post-1986 account balance is not totally distributed to a participant by the required beginning date, distributions of the balance must begin by that date and must, at a minimum, be distributed over one of the following periods: the life of the participant, the lives of the participant and the beneficiary, or a period not extending beyond the life expectancy of the participant or the life expectancy of the participant and a designated beneficiary.¹ If the issuer or custodian of the account does not keep adequate records to distinguish between pre-1987 and post-1986 balances, the entire account will be treated as subject to IRC Section 401(a)(9).²

The minimum distribution requirements include regulations finalized in 2002.³ Additional regulations finalized in 2004 govern annuity distributions under Section 403(b) plans.⁴ Regulations finalized in 2007 apply to distributions after 2008.⁵

The Pension Protection Act of 2006 called for regulations that would provide that governmental plans are subject to a reasonable, good faith interpretation of the minimum distribution requirements.⁶ This same standard is applicable under earlier guidance and compliance with the 2002 regulations, the 2001 regulations, or the 1987 regulations will be considered to meet that standard.⁷