The IRS today released an advance version of Notice 2015-49, announcing that the IRS and Treasury Department intend to amend the minimum distribution regulations under section 401(a)(9) to address the use of lump-sum payments to replace annuity payments being paid by a qualified defined benefit pension plan.
Notice 2015-49 [PDF 285 KB] states that the future amended regulations will provide that qualified defined benefit plans generally are not permitted to replace any joint and survivor, single life, or other annuity currently being paid with a lump-sum payment or other accelerated form of distribution. This future amendment to the regulations will apply as of July 9, 2015, with some exceptions.
Today’s notice states that a number of sponsors of defined benefit pension plans have amended their plans to provide a limited period during which certain retirees who are currently receiving joint and survivor, single life, or other life annuity payments from those plans may elect to convert that annuity into a lump sum that is immediately payable. The IRS and Treasury have determined that the future proposed regulations will provide that the types of permitted benefit increases will include only those that increase the ongoing annuity payments—and not those that accelerate the annuity payments.
The IRS and Treasury intend that these changes to the regulations will apply as of July 9, 2015 (except with respect to certain accelerations of annuity payments described in today’s notice as eligible under a “pre-notice acceleration” as an increase in benefits that result from a plan amendment).
© 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.