Employers may provide option to postpone minimum distributions.

• Jurisdiction: United States
• Author: Josephs, Stuart R.
• Date: 01 May 1997

IRS Ann. 97-24 provides that an employer is not precluded from offering to employees (other than 5% owners), who attain age 70k after 1995 and have not retired, an option to defer commencement of benefit distributions under a qualified plan merely because the plan has not yet been amended to provide for this option.

Background

Section 1404(a) of the Small Business Job Protection Act of 1996 (SBJPA) amended Sec. 401(a)(9) to provide that, for employees who are not 5% owners, the required beginning date for minimum distributions from a qualified plan is April 1 of the calendar year following the later of the calendar year in which the employee attains age 70X or the calendar year in which the employee retires. This amendment applies to years beginning after 1996.

However, the amendment does not change the required beginning date for distributions from an individual retirement account (IRA), including an IRA established with a simplified employee pension or savings investment match plan for employees. (See Notice 96-67.) Thus, distributions from these plans must begin by April 1 of the calendar year following the calendar year in which the employee attains age 70k, even though the employee (or IRA participant)...