[12369]
July 24, 2000
TO: PENSION MEMBERS No. 38-00
PENSION OPERATIONS ADVISORY COMMITTEE No. 52-00
RE: IRS ISSUES FINAL REGULATIONS ON INVOLUNTARY CASH-OUT LIMIT
The Internal Revenue Service has issued final regulations that provide guidance relating to the
increase of the cash-out limit for involuntary distributions from $3,500 to $5,000. This increase was
made effective by the Taxpayer Relief Act of 1997 for plan years beginning after August 5, 1997. These
regulations also eliminate the “lookback rule” pursuant to which certain qualified plan benefits are
deemed to exceed this limit on involuntary distributions. The final regulations, which adopt with only
minor modification the proposed and temporary regulations issued in December, 1998,1 apply to
distributions made after October 16, 2000. Most notably, the final regulations and the preamble to the
final regulations clarify that a plan subject to Code sections 401(a)(11) and 417 may not distribute a
benefit after the annuity starting date without consent, and that this prohibition applies without regard to
the value of the benefit at the annuity starting date and without regard to the distribution form.
Russell G. Galer
Senior Counsel
Attachment
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Attachment (in .pdf format)
1 See Institute Memorandum to Pension Members No. 79-98 and Pension Operations Advisory Committee No. 74-
98, dated December 22, 1998.