Distributions

<div class="Section1"><br /> <br /> If an individual has more than one tax sheltered annuity, each must meet the requirements separately. However, after determining the required minimum for each 403(b) annuity separately, the amounts may be totaled and the total taken from any one or more of the annuities.<br /> <br /> Only amounts that an individual holds as a participant may be aggregated under this rule. If an individual account holder is also the beneficiary of the tax sheltered annuity of a decedent, the required distribution from that account may not be aggregated with amounts required under contracts held by the individual for purposes of meeting the distribution requirements.<a href="#_ftn1" name="_ftnref1">¹</a><br /> <br /> </div><br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%" /><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.  Treas. Reg. § 1.403(b)-3, A-4; Prop. Treas. Reg. § 1.403(b)-6(e)(7).<br /> <br /> </div>

<div class="Section1"><br /> <br /> With respect to distributions other than eligible rollover distributions ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4007">4007</a>), amounts will be withheld from periodic payments at the rates applicable to wage payments and from other distributions at a 10 percent rate. An employee may elect not to have income tax withheld from these payments. Tax will not be withheld on amounts distributed where it is reasonable to believe they will not be includable in income.<a href="#_ftn1" name="_ftnref1">¹</a><br /> <br /> Any eligible rollover distribution made after December&nbsp;31, 1992 is subject to mandatory income tax withholding at the rate of 20 percent unless the distributee elects to have the distribution paid by means of a direct rollover.<a href="#_ftn2" name="_ftnref2">²</a> This mandatory withholding applies even if the employee&rsquo;s employment terminated prior to January&nbsp;1, 1993, and even if the eligible rollover distribution is part of a series of payments that began before January&nbsp;1, 1993.<a href="#_ftn3" name="_ftnref3">³</a> For distributions after 1992 but before October&nbsp;19, 1995, slightly different rules may be applicable under temporary regulations ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4000">4000</a>).<br /> <br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%"><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.&nbsp; IRC &sect;&nbsp;3405; Temp. Treas. Reg. &sect;&nbsp;35.3405-1T, A-20.<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.&nbsp; IRC &sect;&nbsp;3405(c); Treas. Reg. &sect;&nbsp;31.3405(c)-1, A-1(a).<br /> <br /> <a href="#_ftnref3" name="_ftn3">3</a>.&nbsp; Treas. Reg. &sect;&nbsp;31.3405(c)-1, A-1(c)(1)(i).<br /> <br /> </div></div><br />

<div class="Section1"><br /> <br /> With respect to distributions other than eligible rollover distributions ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4007">4007</a>), payments to a surviving spouse or beneficiary are subject to income tax withholding unless the spouse or beneficiary elects not to have withholding apply. Amounts need not be withheld on any part of the distribution where it is reasonable to believe those amounts will not be includable in gross income. Annuity payments are subject to withholding at the rate applicable to wages; other payments are subject to withholding at a 10 percent rate.<a href="#_ftn1" name="_ftnref1">¹</a> In the case of an eligible rollover distribution, a surviving spouse or other beneficiary is subject to the same mandatory withholding rules as the employee ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4088">4088</a>).<br /> <br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%"><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.&nbsp; IRC &sect;&nbsp;3405; Temp. Treas. Reg. &sect;&sect;&nbsp;35.3405-1T, A-17; 35.3405-1T, A-28.<br /> <br /> </div></div><br />

<div class="Section1"><br /> <div class="Section1"><br /> <br /> If an amount distributed from a tax sheltered annuity is not taken by the participant, or is less than the required minimum distribution, an excise tax equal to 50 percent of the shortfall is generally levied against the individual (not the plan).<a href="#_ftn1" name="_ftnref1">¹</a> <em><em>See</em> </em> Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3910">3910</a>.However, the tax may be waived if the payee establishes to the satisfaction of the IRS that the shortfall was due to reasonable error, and that reasonable steps are being taken to remedy the shortfall.<a href="#_ftn2" name="_ftnref2">²</a> Generally, the excise tax will be waived automatically in the case of a beneficiary who receives the entire benefit to which he is entitled under the five-year rule.<a href="#_ftn3" name="_ftnref3">³</a><br /> <br /> The minimum distribution requirements will not be treated as violated and, thus, the<br /> 50 percent excise tax will not apply, where a shortfall occurs because assets are invested in a contract issued by an insurance company in state insurer delinquency proceedings. To the extent that a distribution otherwise required under IRC Section&nbsp;401(a)(9) is not made during the state insurer delinquency proceedings, this amount and any additional amount accrued during this period will be treated as though it is not vested.<a href="#_ftn4" name="_ftnref4">⁴</a><br /> <br /> </div><br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%"><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.&nbsp; IRC &sect;&nbsp;4974.<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.&nbsp; Treas. Reg. &sect;&nbsp;54.4974-2, A-7(a).<br /> <br /> <a href="#_ftnref3" name="_ftn3">3</a>.&nbsp; Treas. Reg. &sect;&nbsp;54.4974-2, A-7(b).<br /> <br /> <a href="#_ftnref4" name="_ftn4">4</a>.&nbsp; Treas. Reg. &sect;&nbsp;1.401(a)(9)-8, A-8.<br /> <br /> </div><br /> </div><br />

<div class="Section1"><br /> <br /> Under 2002 regulations, if distributions are not made as annuity payments under an annuity contract, the account balance generally is distributed according to a uniform lifetime table.<a href="#_ftn1" name="_ftnref1">¹</a> The minimum required to be distributed each year is determined by dividing the post-1986 account balance as of the end of the preceding year by the applicable distribution period of the participant as found in the table. For an example of a calculation under this method, <em><em>see</em> </em> Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3686">3686</a>. The amount of an individual&rsquo;s lifetime required distribution is calculated without regard to the beneficiary&rsquo;s age, except in the case of a spouse beneficiary who is more than 10 years younger than the participant.<a href="#_ftn2" name="_ftnref2">²</a><br /> <br /> If a sole designated beneficiary is a participant&rsquo;s spouse, the distribution period during the participant&rsquo;s lifetime is the longer of the uniform lifetime table or the joint and survivor life expectancy of the participant and spouse<a href="#_ftn3" name="_ftnref3">³</a> using their attained ages in the distribution calendar year.<a href="#_ftn4" name="_ftnref4">⁴</a> As a practical matter, the joint and survivor life expectancy table will produce a longer and thus lower payout only if the spouse beneficiary is more than 10 years younger than the participant.<br /> <br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%"><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.&nbsp; Treas. Reg. &sect;&nbsp;1.401(a)(9)-9, A-2.<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.&nbsp; Treas. Reg. &sect;&nbsp;1.401(a)(9)-5, A-4.<br /> <br /> <a href="#_ftnref3" name="_ftn3">3</a>.&nbsp; Treas. Reg. &sect;&nbsp;1.401(a)(9)-9, A-3.<br /> <br /> <a href="#_ftnref4" name="_ftn4">4</a>.&nbsp; Treas. Reg. &sect;&nbsp;1.401(a)(9)-5, A-4(b).<br /> <br /> </div></div><br />

<div class="Section1"><br /> <br /> A death benefit under a tax sheltered annuity generally is taxed in the same way as a death benefit under a qualified pension, qualified plan or profit sharing plan ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3974">3974</a> to Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3976">3976</a>).<br /> <br /> In the case of a single sum payment where no life insurance is involved, all amounts received by a beneficiary are taxable as ordinary income except that the beneficiary may exclude from gross income the employee&rsquo;s unrecovered cost basis, if any.<br /> <br /> If a death benefit consists of life insurance proceeds, the amount of the proceeds in excess of the cash surrender value of the policy immediately before the insured&rsquo;s death is excludable from gross income under IRC Section&nbsp;101(a)(1). For the rule under the final regulations restricting the availability of life insurance in 403(b) arrangements, <em><em>see</em></em> Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4034">4034</a>.<br /> <br /> Cash surrender value is taxable as ordinary income to the extent that it exceeds the portion of the premiums taxed to the employee as being the cost of life insurance protection (<em><em>see</em></em> Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4061">4061</a> regarding the proper measure of the value of current life insurance protection), and any other unrecovered cost basis of the employee.<a href="#_ftn1" name="_ftnref1">¹</a><br /> <br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%"><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.&nbsp; IRC &sect;&sect;&nbsp;403(c), 72(m)(3)(C); Treas. Reg. &sect;&nbsp;1.72-16(c).<br /> <br /> </div></div><br />

<div class="Section1"><br /> <br /> 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.<a href="#_ftn1" name="_ftnref1">¹</a> 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).<a href="#_ftn2" name="_ftnref2">²</a><br /> <br /> The minimum distribution requirements include regulations finalized in 2002.<a href="#_ftn3" name="_ftnref3">³</a> Additional regulations finalized in 2004 govern annuity distributions under Section 403(b) plans.<a href="#_ftn4" name="_ftnref4">⁴</a> Regulations finalized in 2007 apply to distributions after 2008.<a href="#_ftn5" name="_ftnref5">⁵</a><br /> <br /> 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.<a href="#_ftn6" name="_ftnref6">⁶</a> 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.<a href="#_ftn7" name="_ftnref7">⁷</a><br /> <br /> A participant’s required beginning date is April 1 of the calendar year following the later of the calendar year in which the participant attains age 73 (72 in 2020-2022) or the calendar year in which the participant retires.<a href="#_ftn8" name="_ftnref8">⁸</a> For any part of a Section 403(b) contract that is not part of a government plan or church plan, regulations state that the required beginning date for a 5 percent owner is April 1 of the calendar year following the calendar year in which the employee reaches age 73.<a href="#_ftn9" name="_ftnref9">⁹</a><br /> <br /> Under 2002 regulations (as under earlier guidance), a plan is permitted to provide that the required beginning date for all participants is April 1 of the calendar year following the calendar year in which the participant attains age 72.<a href="#_ftn10" name="_ftnref10">¹⁰</a> Governmental or church plan participants are permitted under the IRC to delay distributions until April 1 of the calendar year following the later of the year in which the participant retires or turns 72; consequently, this provision is not applicable to them.<a href="#_ftn11" name="_ftnref11">¹¹</a><br /> <br /> A distribution for the calendar year a participant becomes age 73 or retires, if applicable, must be made by April 1 of the following calendar year. The distribution for each calendar year after the year the participant becomes 73 or retires, if applicable, must be made by December 31 of that year. Thus, it is possible that distributions for the calendar year in which a participant becomes 73 or retires and the following calendar year will be made in the same calendar year.<br /> <p style="text-align: center;"><strong>Account Balance</strong></p><br /> For purposes of calculating minimum distributions, the account balance is determined as of the last valuation date in the immediately preceding calendar year, that is, the valuation calendar year. The account balance does not include the value of any QLAC held under the plan on or after July 2, 2014.<a href="#_ftn12" name="_ftnref12">¹²</a> Distributions in excess of the amount required in one year may not be used to reduce the amount required in subsequent years.<a href="#_ftn13" name="_ftnref13">¹³</a><br /> <br /> </div><br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%" /><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.  IRC §§ 403(b)(10), 401(a)(9).<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.  Treas. Reg. § 1.403(b)-3, A-2(b); Treas. Reg. § 1.403(b)-6(e)(6)(ii).<br /> <br /> <a href="#_ftnref3" name="_ftn3">3</a>.  TD 8987, 67 Fed. Reg. 18988 (4-17-02).<br /> <br /> <a href="#_ftnref4" name="_ftn4">4</a>.  TD 9130, 2004-26 IRB 1082.<br /> <br /> <a href="#_ftnref5" name="_ftn5">5</a>.  TD 9340, 72 Fed. Reg. 41128 (July 26, 2007).<br /> <br /> <a href="#_ftnref6" name="_ftn6">6</a>.  P.L. 109-280, § 823.<br /> <br /> <a href="#_ftnref7" name="_ftn7">7</a>.  Rev. Proc. 2003-10, 2003-1 CB 259; Notice 2003-2, 2003-1 CB 257.<br /> <br /> <a href="#_ftnref8" name="_ftn8">8</a>.  IRC § 401(a)(9)(C); Treas. Reg. § 1.403(b)-6(e)(3).<br /> <br /> <a href="#_ftnref9" name="_ftn9">9</a>.  Treas. Reg. § 1.403(b)-6(e)(3).<br /> <br /> <a href="#_ftnref10" name="_ftn10">10</a>.  Treas. Reg. § 1.401(a)(9)-2, A-2(e).<br /> <br /> <a href="#_ftnref11" name="_ftn11">11</a>.  IRC § 401(a)(9)(C).<br /> <br /> <a href="#_ftnref12" name="_ftn12">12</a>.  Treas. Reg. § 1.401(a)(9)-5, A-3(a).<br /> <br /> <a href="#_ftnref13" name="_ftn13">13</a>.  Treas. Reg. § 1.401(a)(9)-5, A-2.<br /> <br /> </div>

<div class="Section1"><br /> <br /> Regulations under Section&nbsp;401(a)(9) govern annuity distributions from Section&nbsp;403(b) plans.<a href="#_ftn1" name="_ftnref1">¹</a> Under those regulations, annuity distributions must be periodic payments made at least annually, for a life or lives, or over a period certain not longer than a life expectancy or a joint and survivor life expectancy of the participant or the participant and a beneficiary, as set forth in the IRC&rsquo;s provisions for lifetime and after death distributions ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3896">3896</a>).<a href="#_ftn2" name="_ftnref2">²</a> The annuity also may be a life annuity with a period certain, as long as the life or lives and period certain each meet the foregoing requirements.<a href="#_ftn3" name="_ftnref3">³</a> The distribution of an annuity contract is not a distribution for purposes of meeting the required minimum distribution requirements of IRC<br /> Section&nbsp;401(a)(9).<a href="#_ftn4" name="_ftnref4">⁴</a><br /> <p style="text-align: center;"><strong>Commencement of Distributions</strong></p><br /> Distributions from an annuity contract must begin on or before the participant&rsquo;s required beginning date. The first payment must be the payment that is required for one payment interval. Regulations state that the second payment need not be made until the end of the next payment interval, even if the interval ends in the next calendar year. Examples of payment intervals include monthly, bimonthly, semi-annually, and annually.<a href="#_ftn5" name="_ftnref5">⁵</a><br /> <br /> All benefit accruals as of the last day of the first distribution calendar year must be included in the calculation of the amount of the life annuity payments for payment intervals ending on or after the participant&rsquo;s required beginning date.<a href="#_ftn6" name="_ftnref6">⁶</a><br /> <p style="text-align: center;"><strong>Exceptions to Nonincreasing Annuity Requirement</strong></p><br /> Except as otherwise provided, annuity payments must be nonincreasing, or increase only in accordance with the following:<br /> <p style="padding-left: 40px;">(1)&nbsp; an annual percentage not exceeding that of an eligible cost-of-living index, for example, one issued by the Bureau of Labor Statistics or certain others defined in the regulations;</p><br /> <p style="padding-left: 40px;">(2)&nbsp; a percentage increase that occurs at specified times or specified ages and does not exceed the cumulative total of annual percentage increases in an eligible cost of living index (<em><em>see</em></em> (1)) since the annuity starting date;</p><br /> <p style="padding-left: 40px;">(3)&nbsp; increases to the extent of the reduction in the amount of the employee&rsquo;s payments to provide for a survivor benefit upon death (if a beneficiary dies or is no longer subject to a QDRO, <em><em>see</em></em> Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3915">3915</a>);</p><br /> <p style="padding-left: 40px;">(4)&nbsp; increases that result from a plan amendment; or</p><br /> <p style="padding-left: 40px;">(5)&nbsp; increases to allow a beneficiary to convert the survivor portion of a joint and survivor annuity into a single sum distribution on the employee&rsquo;s death.<a href="#_ftn7" name="_ftnref7">⁷</a></p><br /> <p style="text-align: center;"><strong>Additional Permitted Increases</strong></p><br /> If the total future expected payments from an annuity purchased from an insurance company exceed the total value being annuitized, payments under the annuity will not fail to satisfy the nonincreasing payment requirement merely because the payments are increased in accordance with one or more of the following:<br /> <p style="padding-left: 40px;">(1)&nbsp; by a constant percentage, applied not less frequently than annually;</p><br /> <p style="padding-left: 40px;">(2)&nbsp; to provide a final payment on the employee&rsquo;s death that does not exceed the excess of the total value being annuitized over the total of payments before the death of the employee;</p><br /> <p style="padding-left: 40px;">(3)&nbsp; as a result of dividend payments or other payments resulting from certain actuarial gains; and</p><br /> <p style="padding-left: 40px;">(4)&nbsp; an acceleration of payments under the annuity (as defined in the regulations).<a href="#_ftn8" name="_ftnref8">⁸</a></p><br /> <p style="text-align: center;"><strong>Period Certain Limit</strong></p><br /> The period certain for annuity distributions commencing during the life of a participant,<br /> with an annuity starting date on or after the required beginning date, may not exceed the<br /> Uniform Lifetime Table. If a participant&rsquo;s spouse is the sole beneficiary as of the annuity starting date and the annuity provides only a period certain and no life annuity, the period certain may be as long as the joint and survivor life expectancy of the participant and spouse based on their ages as of their birthdays in the calendar year that contains the annuity starting date.<a href="#_ftn9" name="_ftnref9">⁹</a><br /> <br /> The IRS privately ruled under the 1987 Regulations that an IRC Section&nbsp;403(b) annuity contract that offered a settlement option under which the retirement benefit payment was determined in accordance with the individual account rules, that is, the nonannuity payments rule, and provided for nonlevel retirement income benefits satisfied the minimum distribution<br /> rules.<a href="#_ftn10" name="_ftnref10">¹⁰</a><br /> <br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%"><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.&nbsp; TD 9130, 2004-26 IRB 1082.<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.&nbsp; Treas. Reg. &sect;&sect;&nbsp;1.401(a)(9)-6, A-1(a); 1.401(a)(9)-6, A-3; IRC &sect;&nbsp;401(a)(9)(A).<br /> <br /> <a href="#_ftnref3" name="_ftn3">3</a>.&nbsp; Treas. Reg. &sect;&nbsp;1.401(a)(9)-6, A-1(b).<br /> <br /> <a href="#_ftnref4" name="_ftn4">4</a>.&nbsp; Treas. Reg. &sect;&nbsp;1.401(a)(9)-8, A-10.<br /> <br /> <a href="#_ftnref5" name="_ftn5">5</a>.&nbsp; Treas. Reg. &sect;&nbsp;1.401(a)(9)-6, A-1(c).<br /> <br /> <a href="#_ftnref6" name="_ftn6">6</a>.&nbsp; Treas. Reg. &sect;&nbsp;1.401(a)(9)-6, A-1(c)(1).<br /> <br /> <a href="#_ftnref7" name="_ftn7">7</a>.&nbsp; Treas. Reg. &sect;&nbsp;1.401(a)(9)-6, A-14(a).<br /> <br /> <a href="#_ftnref8" name="_ftn8">8</a>.&nbsp; Treas. Reg. &sect;&sect;&nbsp;1.401(a)(9)-6, A-14(c), 1.401(a)(9)-6, A-14(e).<br /> <br /> <a href="#_ftnref9" name="_ftn9">9</a>.&nbsp; Treas. Reg. &sect;&nbsp;1.401(a)(9)-6, A-3(a).<br /> <br /> <a href="#_ftnref10" name="_ftn10">10</a>.&nbsp; Let. Rul. 9128035.<br /> <br /> </div></div><br />

<div class="Section1"><br /> <br /> The minimum distribution incidental benefit (&ldquo;MDIB&rdquo;) requirement constitutes a second set of minimum distribution rules that must be considered in determining the minimum amount required to be distributed during a participant&rsquo;s lifetime.<a href="#_ftn1" name="_ftnref1">¹</a> The MDIB rules apply to the pre-1987 account balance as well as the post-1986 balance. The reason they apply to the pre-1987 account balance, while the minimum distribution rules under IRC Section&nbsp;401(a)(9) do not, is that unlike those requirements, the incidental benefit rule existed in regulations for many years before it was enacted into the IRC in 1986 and amounts accumulated before 1987 were subject to its requirements. Regulations under IRC Section&nbsp;403(b) required that the death benefit under a tax sheltered annuity be merely incidental to its primary purpose of providing retirement benefits.<br /> <br /> In 2007, regulations under Section&nbsp;403(b) were finalized that briefly addressed the application of the older MDIB rule. These regulations took effect after 2008.<a href="#_ftn2" name="_ftnref2">²</a> They generally restated rules contained in earlier regulations, to the effect that the post-1986 balance is subject to the IRC Section&nbsp;401(a)(9) regulations and that both the pre-1987 balance and the post-1986 balance are subject to the MDIB rule ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4075">4075</a>).<a href="#_ftn3" name="_ftnref3">³</a><br /> <br /> The 2007 regulations do not interpret the old MDIB rule but describe two ways it can be satisfied. First, distributions attributable to the pre-1987 account balance are treated as satisfying the MDIB requirement if all distributions from a Section&nbsp;403(b) contract, including distributions attributable to the post-1986 account balance, satisfy the requirements of Treasury Regulation Section&nbsp;1.401-1(b)(1)(i) (which the regulations cite as authority for the old MDIB rule) without regard to whether distributions under the 2002 regulations and distributions from the post-1986 account satisfy the requirements of IRC Section&nbsp;401(a)(9).<a href="#_ftn4" name="_ftnref4">⁴</a><br /> <br /> Second, and in the alternative, distributions attributable to the pre-1987 account will be treated as satisfying the MDIB requirement if all distributions from the contract, whether pre-1987 or post-1986 amounts, satisfy the regulations under IRC Section&nbsp;401(a)(9).<a href="#_ftn5" name="_ftnref5">⁵</a><br /> <br /> Under much earlier rulings, the old rule generally was interpreted as requiring a distribution arrangement under which the present value of the aggregate payments to be made to the participant must be more than 50 percent of the present value of the total payments to be made to the participant and his or her beneficiaries.<a href="#_ftn6" name="_ftnref6">⁶</a> The old rules generally required that<br /> distributions commence by age 75.<a href="#_ftn7" name="_ftnref7">⁷</a> It would appear that the old rules may continue to apply in determining distributions required from the pre-1987 balance.<a href="#_ftn8" name="_ftnref8">⁸</a> Of course, nothing would prevent a participant from choosing to apply the Section&nbsp;401(a)(9) rules.<a href="#_ftn9" name="_ftnref9">⁹</a><br /> <br /> Final 2002 regulations state that if distributions are made in accordance with the individual account rules set forth therein ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4078">4078</a>), the MDIB requirement will be satisfied.<a href="#_ftn10" name="_ftnref10">¹⁰</a><br /> <br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%"><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.&nbsp; IRC &sect;&nbsp;403(b)(10); Treas. Reg. &sect;&nbsp;1.401-1(b)(1)(i).<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.&nbsp; TD 9340, 72 Fed. Reg. 41128 (July&nbsp;26, 2007).<br /> <br /> <a href="#_ftnref3" name="_ftn3">3</a>.&nbsp; Treas. Reg. &sect;&nbsp;1.403(b)-3, A-2, A-3; Treas. Reg. &sect;&nbsp;1.403(b)-6(e)(6).<br /> <br /> <a href="#_ftnref4" name="_ftn4">4</a>.&nbsp; Treas. Reg. &sect;&nbsp;1.403(b)-3, A-3; Treas. Reg. &sect;&nbsp;1.403(b)-6(e)(6)(vi).<br /> <br /> <a href="#_ftnref5" name="_ftn5">5</a>.&nbsp; Treas. Reg. &sect;&nbsp;1.403(b)-3, A-3; Treas. Reg. &sect;&nbsp;1.403(b)-6(e)(6)(vi).<br /> <br /> <a href="#_ftnref6" name="_ftn6">6</a>.&nbsp; Rev. Rul. 72-241, 1972-1 CB 108; Rev. Rul. 73-239, 1973-1 CB 201; Let. Ruls. 8642072, 7843043, 7825010.<br /> <br /> <a href="#_ftnref7" name="_ftn7">7</a>.&nbsp; Let. Ruls. 9345044, 7825010.<br /> <br /> <a href="#_ftnref8" name="_ftn8">8</a>.&nbsp; Let. Rul. 9345044.<br /> <br /> <a href="#_ftnref9" name="_ftn9">9</a>.&nbsp; Treas. Reg. &sect;&nbsp;1.403(b)-3, A-3; Treas. Reg. &sect;&nbsp;1.403(b)-6(e)(6)(vi).<br /> <br /> <a href="#_ftnref10" name="_ftn10">10</a>.&nbsp; Treas. Reg. &sect;&nbsp;1.401(a)(9)-5, A-1(d).<br /> <br /> </div></div><br />

<div class="Section1"><br /> <br /> <em>Editor&rsquo;s Note:</em> Post-SECURE Act, it was widely expected that the minimum distribution rules would no longer vary based upon whether the participant dies before or after his or her required beginning date. However, under regulations proposed in 2022, a beneficiary will be required to take annual RMDs during the new ten-year distribution period if the original account owner died on or after his or her required beginning date. <em><em>See</em> </em> Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3902">3902</a> for details.<br /> <br /> A tax sheltered annuity must satisfy the minimum distribution requirements set forth in IRC Section&nbsp;401(a)(9) for qualified plans.<a href="#_ftn1" name="_ftnref1">¹</a> Most of the requirements were explained in regulations published in 2002.<a href="#_ftn2" name="_ftnref2">²</a> Regulations governing annuity payouts from defined benefit plans were finalized in 2004 ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4078">4078</a>, Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3754">3754</a>), and regulations addressing additional matters were finalized under IRC Section&nbsp;403(b) in 2007.<a href="#_ftn3" name="_ftnref3">³</a><br /> <br /> The 2002 regulations simplified the calculation process and included longer life expectancy tables. The final regulations took effect for required minimum distributions in 2003 and later years ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3896">3896</a>, Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4078">4078</a>).<br /> <br /> Pre-SECURE Act, after the death of a tax sheltered annuity participant, the application of the minimum distribution requirements depended on whether he or she died before or after his or her required beginning date. For this purpose, distributions generally were treated as having begun in accordance with the minimum distribution requirements under IRC Section&nbsp;401(a)(9)(A)(ii), without regard to whether payments had been made before that date.<a href="#_ftn4" name="_ftnref4">⁴</a> If distributions irrevocably, except for acceleration, began prior to the required beginning date in the form of an annuity that meets the minimum distribution rules, the annuity starting date was treated as the required beginning date for purposes of calculating lifetime and after death minimum distribution requirements.<a href="#_ftn5" name="_ftnref5">⁵</a><br /> <br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%"><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.&nbsp; IRC &sect;&nbsp;403(b)(10).<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.&nbsp; TD 8987, 67 Fed. Reg. 18988 (4-17-02).<br /> <br /> <a href="#_ftnref3" name="_ftn3">3</a>.&nbsp; Treas. Reg. &sect;&nbsp;1.403(b)-6.<br /> <br /> <a href="#_ftnref4" name="_ftn4">4</a>.&nbsp; Treas. Reg. &sect;&nbsp;1.401(a)(9)-2, A-6(a).<br /> <br /> <a href="#_ftnref5" name="_ftn5">5</a>.&nbsp; Treas. Reg. &sect;&nbsp;1.401(a)(9)-6, A-10, A-11.<br /> <br /> </div></div><br />