Future pension regulations, replacing lifetime income

Future pension regulations, replacing lifetime income

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.


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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.

Reason for regulations

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).

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