The rules, which would likely reduce the payment amount for most, would be applicable for determining required minimum distributions for calendar years beginning on or after January 1, 2002. However, the IRS says that minimum distributions for calendar year 2001 can be calculated using these, or the 1987 proposed regulations – which were never finalized.
The IRS says if future guidance is more restrictive, it will not be applied retroactively.
Among other things the new rules:
- provide a uniform table to determine the minimum distribution amount, rather than locking in a participant choice at age 70.5
- that uniform table requires smaller payouts than the old regulations
- minimum distributions of inherited IRAs are based on the life expectancy of the beneficiary – which isn’t finalized until 12/31 of the year following the death of the account owner. Current practice locks in that decision when the IRA owner hits 70.5.
However, IRA providers will now have to report minimum required distribution amounts to both the taxpayer and the IRS.
Final regulations probably won’t be implemented until January 1, 2002, after comments and public hearings. Comments on the proposed regulations are being sought until April 19.
The regulations were published in the January 17 Federal Register.