In Notice 2009-82, the IRS provides guidance pertaining to the waiver of required minimum distributions (“RMDs”) for 2009 provided by the Worker, Retiree, and Employer Recovery Act of 2008 (“WRERA”). WRERA added Section 401(a)(9)(H) to the Internal Revenue Code (the “Code”). This Section provides that the minimum distribution requirements of Section 401(a)(9) do not apply to defined contribution plans and IRAs for 2009. In particular, the Notice:
• provides transition relief through November 30, 2009 for a plan that is not operated in accordance with its terms with respect to waived RMDs and certain related payments;
• sets out rollover relief with respect to waived RMDs and certain related payments, including an extension of the 60-day rollover period to November 30, 2009 for certain of the distributions; and
•answers questions that have been raised regarding the waiver of 2009 RMDs under WRERA.
Under the transition relief, a plan will not be treated as failing to satisfy the requirement that it be operated in accordance with its terms merely because, during the period beginning on January 1, 2009, and ending on November 30, 2009: (1) distributions that equal, or are “Periodic Payments” which include, the 2009 RMDs were or were not paid, (2) plan participants and beneficiaries were not given the option of receiving or not receiving distributions that include 2009 RMDs, or (3) a direct rollover option was or was not offered for 2009 RMDs, or for Periodic Payments that include 2009 RMDs. For this purpose, “Periodic Payments” are payments in a series of substantially equal payments which are made at least annually, and which are expected to last for the life (or life expectancy) of the participant, the joint lives (or joint life expectancy) of the participant and the participant’s designated beneficiary, or for a period of at least 10 years.
Under the rollover relief, payments to a plan participant in 2009 will not be treated as ineligible for rollover on account of Section 402(c)(4)(A) of the Code (under which Periodic Payments are not eligible for rollover) if the payments equal, or are Periodic Payments which include, the 2009 RMDs. Accordingly, such payments can be rolled over, provided that the other rules of Section 402(c) are satisfied. To help plan participants complete rollovers, the Notice extends the 60-day rollover period, for any 2009 RMD and Periodic Payments that include a 2009 RMD, so that it ends no earlier than November 30, 2009. In the case of IRA owners who have already received 2009 RMDs in 2009, the Notice extends the 60-day rollover period for any such distribution, so that it ends no earlier than November 30, 2009. However, due to the one-rollover-per-year rule in the Code, no more than one distribution from an IRA in 2009 is eligible for this rollover relief.
The notice also provides two sample plan amendments which an employer or prototype plan sponsor can adopt or use in drafting individualized or prototype plan amendments. Both amendments give plan participants a choice as to whether to take an RMD which may be waived under WRERA, and apply the direct rollover rules to any distributions so taken. Either plan amendment may be chosen by the employer or prototype plan sponsor, regardless of current plan language, although the sample amendment may have to be modified to conform to the plan’s terms and administrative procedures. The amendment must be adopted no later than by the last day of the first plan year beginning after 2010 (2011for governmental plans), and (except as otherwise provided in the Notice), must reflect the operation of the plan to either cease or continue 2009 RMDs, and any election given participants in this regard. The timely adoption of the amendment must be evidenced by a written document that is signed and dated by the employer (including an adopting employer of a prototype plan) or prototype plan sponsor.