**Part III \-- Administrative, Procedural, and Miscellaneous**

**Required Minimum Distributions for Defined Benefit Plans and Annuity
Contracts**

**Notice 2003-2**

PURPOSE

The Internal Revenue Service and Treasury Department intend to issue
regulations that will provide further guidance on the minimum
distribution requirements of § 401(a)(9) of the Internal Revenue Code
for defined benefit plans and annuity contracts. In particular, it is
anticipated that the regulations will contain a transition rule
permitting plans to satisfy certain requirements set forth in proposed
regulations under § 401(a)(9) issued prior to 2002 in lieu of complying
with the requirements in A-1 of § 1.401(a)(9)-6T of the Temporary Income
Tax Regulations. Further, it is anticipated that the regulations will
contain a transition rule permitting the entire interest under an
annuity contract to be determined without taking into account the value
of certain benefits that would be required to be taken into account
under A-12 of § 1.401(a)(9)-6T. Finally, it is anticipated that the
regulations will provide that governmental plans must comply with the
regulations as of a special effective date described below and will
provide transitional relief for the period before the special effective
date. The Service and Treasury invite comments on these issues before
regulations are issued.

BACKGROUND

Section 401(a)(9) provides rules for required minimum distributions from
retirement plans qualified under §§ 401(a) and 403(a). These rules are
incorporated by reference in § 408(a)(6) and (b)(3) for distributions
from individual retirement arrangements (\"IRAs\") (including Roth IRAs
with respect to distributions paid following the death of the Roth IRA
owner), § 403(b)(10) for distributions from § 403(b) annuity contracts,
and § 457(d) for distributions from eligible deferred compensation
plans.

Final and temporary regulations relating to required minimum
distributions under Code § 401(a)(9) (§§ 1.401(a)(9)-1 through
1.401(a)(9)-5, § 1.401(a)(9)-6T, and §§ 1.401(a)(9)-7 through
1.401(a)(9)-9) were issued on April 17, 2002 (74 FR 18987). A-2 of
§ 1.401(a)(9)-1 provides that the final and temporary regulations
(including § 1.401(a)(9)-6T) apply for determining required minimum
distributions for calendar years beginning on or after January 1, 2003.
The preamble to those regulations provides that, for determining
required minimum distributions for calendar year 2002, taxpayers may
rely on the final and temporary regulations, the 2001 proposed
regulations, or the 1987 proposed regulations. (The 1987 proposed
regulations were published in the **Federal Register** on July 27, 1987
(52 FR 28070) and the 2001 proposed regulations were published in the
**Federal Register** on January 17, 2001 (66 FR 3928).) Notice 2002-27,
2002-18 I.R.B. 814, sets forth reporting requirements with respect to
required minimum distributions from IRAs.

Section 1.401(a)(9)-6T was issued as a temporary and proposed regulation
in order to allow taxpayers to comment on changes made to the rules
applicable to defined benefit plans and annuity contracts. The Service
received numerous comments relating to the new restrictions on variable
annuity payments, and certain other increasing annuity payments, set
forth in A-1 of § 1.401(a)(9)-6T. Commentators also requested additional
guidance in applying the rule in A-12 of § 1.401(a)(9)-6T that requires
the entire interest under an annuity contract to include the actuarial
value of other benefits (such as minimum survivor benefits) provided
under the contract and that the rule requiring the inclusion of these
values (including inclusion in the required reporting to the IRA holder
under Notice 2002-27) be delayed until the guidance is provided.
Finally, commentators requested that special consideration be provided
to governmental plans.

ANTICIPATED REGULATORY PROVISIONS

In order to allow further time for the Service and Treasury to fully
consider the issues raised in comments with respect to the new
restrictions on variable annuity payments, and certain other increasing
annuity payments, set forth in A-1 of § 1.401(a)(9)-6T, and to prevent
employers from being required to make changes to their plans until this
additional consideration is completed, it is expected that future
regulations will provide a transition rule for annuity payments. This
transition rule is expected to apply at least through the end of the
calendar year final regulations are published and is expected to provide
that distributions paid under a defined benefit plan or annuity contract
(including an annuity described in § 408(b) or § 403(b)) that satisfy
the requirements of A-1 of § 1.401(a)(9)-6 of the 2001 proposed
regulations or F-3 and F-3A of § 1.401(a)(9)-1 of the 1987 proposed
regulations, will be deemed to satisfy the requirements of A-1 of
§ 1.401(a)(9)-6T.

In addition, to allow further time for the Service and Treasury to fully
consider the issues raised in comments with respect to the rule in A-12
of § 1.401(a)(9)-6T that requires the entire interest under an annuity
contract to include the actuarial value of other benefits (such as
minimum survivor benefits) provided under the contract and to prevent
employers from being required to make changes to their plans until this
additional consideration is completed, it is expected that future
regulations will provide a transition rule for the determination of the
value of annuity contracts. This transition rule is expected to apply at
least through the end of the calendar year final regulations are
published and is expected to provide that, for purposes of A-12 of
§ 1.401(a)(9)-6T, the entire interest under an annuity contract
(including an annuity described in § 408(b) or § 403(b)) is permitted to
be determined as the dollar amount credited to the employee or
beneficiary under the annuity contract without regard to the actuarial
value of any other benefits (such as minimum survivor benefits) that
will be provided under the contract.

Finally, in order to allow further time for the Service and Treasury to
fully consider the issues raised in comments with respect to whether and
to what extent special consideration should be provided to governmental
plans, it is expected that future regulations will provide a special
effective date for governmental plans for § 1.401(a)(9)-6T (or any
regulation that supersedes or replaces § 1.401(a)(9)-6T). The special
effective date is not expected to be earlier than the first calendar
year beginning after the later of (1) the calendar year in which the
final regulations are published or (2) 90 days after the opening of the
first legislative session, beginning on or after the date the final
regulations are published, of the governing body with authority to amend
the plan, if that body does not meet continuously. For purposes of this
paragraph, the governing body with authority to amend the plan is the
legislature, board, commission, council, or other governing body with
authority to amend the plan. In addition, it is expected that the future
regulations will provide a transitional rule for the period before the
special effective date that will permit a governmental plan to rely on a
reasonable good faith interpretation of § 401(a)(9) as it applies to
defined benefit plans and annuity contracts. Compliance with
§ 1.401(a)(9)-6T, the 2001 proposed regulations, or the 1987 proposed
regulations, as they relate to defined benefit plans and annuity
contracts, will be deemed to meet this reasonable good faith standard.

RELIANCE

The IRS and Treasury anticipate issuing the regulations described in
this notice in 2003. In the meantime, taxpayers may rely on the
transition rules described in this notice. Except as described above,
taxpayers are required to comply with the final and temporary
regulations (including § 1.401(a)(9)-6T) for purposes of determining
required minimum distributions for calendar years beginning on or after
January 1, 2003.

For purposes of determining the amount of the required minimum
distribution with respect to an IRA for purposes of reporting to the IRA
owner under Notice 2002-27, trustees may rely on the transition rule
described above for A-12 of § 1.401(a)(9)-6T. Thus, in the case of an
annuity contract under an IRA from which annuity payments have not
commenced on an irrevocable basis (except for acceleration), the IRA
trustee may determine the entire interest under the annuity contract as
the dollar amount credited to the employee or beneficiary under the
annuity contract without regard to the actuarial value of any other
benefits (such as minimum survivor benefits) that will be provided under
the contract. The relief provided in this paragraph will continue to be
available at least through the end of the calendar year in which final
regulations regarding required minimum distributions under a defined
benefit plan or annuity contract are issued. Otherwise, the reporting
requirements set forth in Notice 2002-27 continue to apply.

COMMENTS REQUESTED

The Service and Treasury invite comments on the issues identified in
this notice. Comments should be submitted by March 1, 2003, in writing,
and should reference Notice 2003-2.

Comments may be submitted to CC:ITA:RU (Notice 2003-2), room 5226,
Internal Revenue Service, POB 7604 Ben Franklin Station, Washington, DC
20044. Comments may be hand delivered between the hours of 8 a.m. and 4
p.m. CC:ITA:RU (Notice 2003-2), Courier\'s Desk, Internal Revenue
Building, 1111 Constitution Avenue NW., Washington, D.C. Alternatively,
comments may be submitted via the Internet at All comments will be
available for public inspection and copying.

DRAFTING INFORMATION

The principal authors of this notice are Roger Kuehnle of Employee Plans
(Tax Exempt and Government Entities Division) and Cathy Vohs of the
Office of the Division Counsel/Associate Chief Counsel (Tax Exempt and
Government Entities). For further information regarding this notice,
please contact the Employee Plans taxpayer assistance telephone service
(between the hours of 8:00 a.m. and 6:30 p.m. Eastern Time, Monday
through Friday) at 1-877-829-5500 (a toll-free number). Mr. Kuehnle may
be reached at 202-283-9888 (not a toll-free number). Ms. Vohs may be
reached at 202-622-6090 (not a toll-free number).