December 29, 1992
TO: PENSION COMMITTEE NO. 47-92
RE: INSTITUTE COMMENTS ON PROPOSED TWENTY-PERCENT WITHHOLDING
REGULATIONS
_________________________________________________________
Attached is a copy of the Institute’s submission to the
Internal Revenue Service concerning the temporary and proposed
regulations under the Unemployment Compensation Amendments of
1992. (See Institute Memorandum to Pension Members No. 28-92,
Operations Members No. 39-92, and Transfer Agent Advisory
Committee No. 62-92, dated October 22, 1992.)
The Institute’s comments focus upon three aspects of the
regulations. First, the Institute’s letter urges that the final
regulations permit participants to waive the 30-day advance
notice requirement by making affirmative elections concerning
their distributions. The Institute’s submission also recommends
that the responsibility to provide the notice in the context of a
section 403(b) arrangement rest in the first instance upon the
plan administrator, and shift to the payor only if the
arrangement does not have a plan administrator.
Second, the comments address the means by which direct
rollovers are accomplished. The Institute supports the use of a
standard notation to differentiate checks representing direct
rollovers from those representing trustee-to-trustee transfers.
In addition, the Institute requests clarification that a direct
rollover check cannot include amounts representing employee
after-tax contributions.
Third, the Institute submission requests certain
clarifications concerning payors’ responsibilities with respect
to required minimum distributions under section 401(a)(9) of the
Code, which do not qualify as eligible rollover distributions.
With respect to qualified plans, the Institute recommends that,
in order to shift the withholding responsibility from the plan
administrator to the payor, the plan administrator must identify
which portion, if any, of a participant’s distribution represents
a required minimum distribution. The Institute also urges the
Service to clarify in the final regulations that a payor under a
section 403(b) arrangement may assume that a distribution does
not represent a required minimum distribution, unless otherwise
advised by the participant.
We will keep you informed of developments.
Kathy D. Ireland
Associate Counsel - Pension
Attachment