New simplified rules: New distribution rules for qualified retirement plans and IRAs.

• Author: Josephs, Stuart R.

The March/April 2001 issue of California CPA, Page 32, summarized the 2001 proposed regulations that provide simplified rules for required minimum distributions from qualified retirement plans and IRAs: "The regs are proposed to be applicable for determining RMDs for calendar years beginning after 2001. For determining RMDs for 2001, taxpayers may rely on these proposals or on regs. proposed in 1987 ... ."

IRS Ann. 2001-18, IRB No. 2001-10, Mar. 5, 2001, Page 791, clarifies these effective dates as follows: "For this purpose, distributions for calendar year 2001 do not include a distribution that is required to be made by April 1, 2001, for calendar year 2000, such as for an IRA owner or retired qualified plan participant who attains age 70.5 in 2000. To determine the amount of such a distribution ... , taxpayers may rely on the 1987 Proposed Regulations."

Thus, IRS Notice 1269, supplementing IRS Publication 575, Pensions and Annuity Income, states: "If your required beginning date is April 1, 2001 (either because you attained age 70.5 or retired in 2000), and you are taking your minimum required distribution for 2000 by April 1, 2001, do not use the new rules for figuring the distribution for 2000. Instead, use the old rules in Publication 575. Use the new rules for figuring the required distribution for 2001 that must be made by the end of 2001."

Similarly, Notice 1270, supplementing Publication 590, Individual Retirement Arrangements (IRAs), states: "If you attained age 70.5 in 2000 and are taking your minimum required distribution for 2000 by April 1, 2001, do not use the new rules for figuring the distribution for 2000. Instead, use the old rules in Publication 590. Use the new rules for figuring the required distribution for 2001 that must be made by the end of 2001."

The texts of notices 1269 and 1270 are contained in IRS Ann. 2001-23, IRB No. 2001-10, Page 791.

The preamble to the 2001 proposed regs. points out: "For distributions for the 2001 calendar year, IRA owners are permitted, but not required, to follow these proposed regulations in operation, notwithstanding the terms of the IRA documents. IRA owners may therefore rely on these proposed regulations for distributions for the 2001 calendar year. However, IRA sponsors should not amend their IRA documents to conform their IRAs to the changes in these proposed regulations before the publication of final regulations ...."

In contrast, for qualified plans, the preamble states: "...