Compliance March 12, 2018

IRS Expands Audit Guidance for RMDs to 403(b) Plans

A memo says examiners should not challenge a 403(b) plan for violation of the RMD standards for the failure to commence or make a distribution to a participant or beneficiary to whom a payment is due, if the plan sponsor has taken certain steps.

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In a February 23 memorandum to Employee Plans (EP) examinations employees, the Internal Revenue Service (IRS) issued guidance about handling 403(b) plan efforts to issue required minimum distributions (RMDs) to missing participants.

Similar to a memo issued last year, the current memo regarding 403(b) plans states that EP examiners shall not challenge a 403(b) contract for violation of the RMD standards for the failure to commence or make a distribution to a participant or beneficiary to whom a payment is due, if the plan has taken the following steps:

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  • Searched plan and related plan, sponsor, and publicly available records or directories for alternative contact information;
  • Used a commercial locator service; a credit reporting agency; or a proprietary internet search tool for locating individuals; and
  • Attempted contact via United States Postal Service (USPS) certified mail to the last known mailing address and through appropriate means for any address or contact information (including email addresses and telephone numbers).
If a 403(b) plan has not completed the steps above, EP examiners may challenge a 403(b) plan for violation of the RMD standards.

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