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March 29, 1989
TO: PENSION MEMBERS NO. 22-89
RE: IRS NOTICE CONCERNING REQUIRED BEGINNING DATE UNDER
CODE SECTION 401(a)(9)
__________________________________________________________
Attached is a copy of IRS Notice 89-42, which provides
guidance concerning the required beginning date for minimum
distributions from qualified plans and section 403(b)
arrangements under section 401(a)(9) of the Internal Revenue Code
for certain individuals.
Prior to the 1986 Tax Reform Act, employees who were not
five percent owners were required to begin receiving
distributions from their qualified plans not later than April 1
of the calendar year following the later of (1) the calendar year
in which the employee attained age 70-1/2, or (2) the calendar
year in which the employee retired. The 1986 Tax Reform Act
amended section 401(a)(9) to require generally that distributions
from qualified plans and section 403(b) arrangements must begin
by April 1 of the calendar year following the calendar year in
which the employee attained age 70-1/2, regardless of when he or
she retired, effective for years beginning after December 31,
1988.
Grandfather treatment was provided to allow limited
reliance on the retirement year delay, but only with respect to
employees who attained age 70-1/2 before January 1, 1988 and are
not five percent owners. Accordingly, proposed regulations under
section 401(a)(9) provided that all employees attaining age 70-
1/2 in 1988 must begin receiving distributions by April 1, 1989,
even if they are not separated from service.
Notice 89-42 explains, however, that the effective date of
the repeal of the retirement year delay of section
401(a)(9)(c)(ii) is January 1, 1989 for calendar year taxpayers.
Thus, an employee who attained age 70-1/2 in 1988, is not a five
percent owner, and who had not retired by January 1, 1989 will be
treated under the final regulations as having retired on January
1, 1989. The required beginning date for such employees
therefore will be April 1, 1990.
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We will keep you informed of further developments.
Kathy D. Ireland
Assistant General Counsel
Attachment