10504 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Parts 1 and 54 

[REG–105954–20] 

RIN 1545–BP82 

Required Minimum Distributions 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking 

and notice of public hearing. 

SUMMARY: This document contains 

proposed regulations relating to 

required minimum distributions from 

qualified plans; section 403(b) annuity 

contracts, custodial accounts, and 

retirement income accounts; individual 

retirement accounts and annuities; and 

eligible deferred compensation plans 

under section 457. These regulations 

will affect administrators of, and 

participants in, those plans; owners of 

individual retirement accounts and 

annuities; employees for whom amounts 

are contributed to section 403(b) 

annuity contracts, custodial accounts, or 

retirement income accounts; and 

beneficiaries of those plans, contracts, 

accounts, and annuities. 

DATES: Written or electronic comments 

must be received by May 25, 2022. 

Outlines of topics to be discussed at the 

public hearing scheduled for June 15, 

2022, at 10:00 a.m. must be received by 

May 25, 2022. 

As of February 24, 2022, § 1.408–8 of 

the notice of proposed rulemaking that 

was published in the Federal Register 

on July 14, 1981 (46 FR 36198) is 

withdrawn. 

ADDRESSES: Commenters are strongly 

encouraged to submit public comments 

electronically. Submit electronic 

submissions via the Federal 

eRulemaking Portal at 

www.regulations.gov (indicate IRS and 

REG–105954–20) by following the 

online instructions for submitting 

comments. Once submitted to the 

Federal eRulemaking Portal, comments 

cannot be edited or withdrawn. The IRS 

expects to have limited personnel 

available to process public comments 

that are submitted on paper through 

mail. Until further notice, any 

comments submitted on paper will be 

considered to the extent practicable. 

The Department of the Treasury 

(Treasury Department) and the IRS will 

publish for public availability any 

comment submitted electronically, and 

to the extent practicable on paper, to its 

public docket. Send paper submissions 

to: CC:PA:LPD:PR (REG–105954–20), 

Room 5203, Internal Revenue Service, 

P.O. Box 7604, Ben Franklin Station, 

Washington, DC 20044. 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

Brandon M. Ford or Laura B. 

Warshawsky, (202) 317–6700; 

concerning submissions of comments 

and outlines of topics for the public 

hearing, Regina Johnson, (202) 317– 

5177 (not toll-free numbers). 

SUPPLEMENTARY INFORMATION: 

Background 

This document contains proposed 

amendments to the Income Tax 

Regulations (26 CFR part 1) under 

section 401(a)(9) of the Internal Revenue 

Code of 1986 (Code). These proposed 

regulations address the required 

minimum distribution requirements for 

plans qualified under section 401(a) and 

are being proposed to update the 

regulations to reflect the amendments 

made to section 401(a)(9) by sections 

114 and 401 of the Setting Every 

Community Up for Retirement 

Enhancement Act of 2019 (SECURE 

Act), enacted on December 20, 2019, as 

Division O of the Further Consolidated 

Appropriations Act of 2019, Public Law 

116–94, 133 Stat. 2534 (2019). 

The rules of section 401(a)(9) are 

adopted by reference in section 

408(a)(6) and (b)(3) for individual 

retirement accounts and individual 

retirement annuities (collectively, IRAs), 

section 408A(c)(5) for Roth IRAs, 

section 403(b)(10) for annuity contracts, 

custodial accounts, and retirement 

income accounts described in section 

403(b) (section 403(b) plans), and 

section 457(d) for eligible deferred 

compensation plans. The determination 

of the required minimum distribution is 

also relevant for purposes of the related 

excise tax under section 4974 and the 

definition of eligible rollover 

distribution in section 402(c). 

Accordingly, this document also 

contains proposed conforming 

amendments to the Income Tax 

Regulations (26 CFR part 1) under 

sections 402(c), 403(b), 408, and 457, 

and to the Pension Excise Tax 

Regulations (26 CFR part 54) under 

section 4974. 

Section 401(a)(9)—Required Minimum 

Distributions 

Section 401(a)(9) provides rules for 

distributions from a qualified plan 

during the life of the employee in 

section 401(a)(9)(A) and after the death 

of the employee in section 401(a)(9)(B). 

The rules set forth a required beginning 

date for distributions and identify the 

period over which the employee’s entire 

interest must be distributed. 

Specifically, section 401(a)(9)(A)(ii) 

provides that the entire interest of an 

employee in a qualified plan must be 

distributed, beginning not later than the 

employee’s required beginning date, in 

accordance with regulations, over the 

life of the employee or over the lives of 

the employee and a designated 

beneficiary (or over a period not 

extending beyond the life expectancy of 

the employee and a designated 

beneficiary). Section 401(a)(9)(B)(i) 

provides that, if the employee dies after 

distributions have begun, the 

employee’s remaining interest must be 

distributed at least as rapidly as under 

the distribution method used by the 

employee as of the date of the 

employee’s death. 

Section 401(a)(9)(B)(ii) and (iii) 

provides that, if the employee dies 

before required minimum distributions 

have begun, the employee’s interest 

must either be: (1) Distributed (in 

accordance with regulations) over the 

life or life expectancy of the designated 

beneficiary with the distributions 

generally beginning no later than 1 year 

after the date of the employee’s death; 

or (2) distributed within 5 years after the 

death of the employee. However, under 

section 401(a)(9)(B)(iv), a surviving 

spouse may wait until the date the 

employee would have attained age 72 to 

begin taking required minimum 

distributions. 

Section 401(a)(9)(C) (as amended by 

section 114 of the SECURE Act) defines 

the required beginning date for an 

employee (other than a 5-percent owner 

or IRA owner) as April 1 of the calendar 

year following the later of the calendar 

year in which the employee attains age 

72 or the calendar year in which the 

employee retires. For a 5-percent owner 

or an IRA owner, the required beginning 

date is April 1 of the calendar year 

following the calendar year in which the 

individual attains age 72, even if the 

individual has not retired. Section 

401(a)(9)(C)(iii) provides that certain 

employees who commence benefits 

under a defined benefit plan after the 

year in which they attain age 701⁄2 must 

receive an actuarial increase. 

Section 401(a)(9)(D) provides that 

(except in the case of a life annuity) the 

life expectancy of an employee and the 

employee’s spouse that is used to 

determine the period over which 

payments must be made may be 

redetermined, but not more frequently 

than annually. 

Section 401(a)(9)(E)(i) defines the 

term designated beneficiary as any 

individual designated as a beneficiary 

by the employee. Section 401(a)(9)(E)(ii) 

(which was added as part of section 401 

of the SECURE Act) defines the term 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10505 

1The eligible retirement plans described in 

section 402(c)(8)(B)(iv) and (v) are an annuity plan 

described in section 403(a) and an eligible deferred 

compensation plan described in section 457(b) that 

is maintained by an eligible employer described in 

section 457(e)(1)(A), respectively. 

2Section 401(b)(4)(B) of the SECURE Act 

provides that the term qualified annuity means, 

with respect to an employee, an annuity— 

(i) which is a commercial annuity (as defined in 

section 3405(e)(6) of the Internal Revenue Code of 

1986); 

(ii) under which the annuity payments are made 

over the life of the employee or over the joint lives 

of such employee and a designated beneficiary (or 

over a period not extending beyond the life 

expectancy of such employee or the joint life 

expectancy of such employee and a designated 

beneficiary) in accordance with the regulations 

described in section 401(a)(9)(A)(ii) of such Code 

(as in effect before such amendments) and which 

meets the other requirements of section 401(a)(9) of 

such Code (as so in effect) with respect to such 

payments; and 

(iii) with respect to which— 

(I) annuity payments to the employee have begun 

before the date of enactment of the SECURE Act, 

and the employee has made an irrevocable election 

before such date as to the method and amount of 

the annuity payments to the employee or any 

designated beneficiaries; or 

(II) if subclause (I) does not apply, the employee 

has made an irrevocable election before the date of 

enactment of the SECURE Act as to the method and 

amount of the annuity payments to the employee 

or any designated beneficiaries. 

eligible designated beneficiary with 

respect to any employee, as any 

designated beneficiary who, as of the 

date of the employee’s death, is: (1) The 

surviving spouse of the employee; (2) a 

child of the employee who has not 

reached the age of majority (within the 

meaning of section 401(a)(9)(F)); (3) 

disabled (within the meaning of section 

72(m)(7)); (4) a chronically ill individual 

(within the meaning of section 

7702B(c)(2), subject to certain 

exceptions); or (5) an individual not 

described elsewhere in section 

401(a)(9)(E)(ii) who is not more than 10 

years younger than the employee. 

Section 401(a)(9)(E)(iii) provides that, 

subject to the rule in section 

401(a)(9)(F), the treatment of an 

employee’s child as an eligible 

designated beneficiary ends when the 

child attains the age of majority and that 

any remaining interest must be 

distributed within 10 years of that date. 

Section 401(a)(9)(F) provides that, under 

regulations, any amount paid to a child 

is treated as if it had been paid to the 

surviving spouse if it will be paid to the 

surviving spouse upon that child 

reaching the age of majority (or other 

designated event permitted under 

regulations). 

Section 401(a)(9)(G) provides that any 

distribution required to satisfy the 

incidental death benefit requirement of 

section 401(a) is treated as a required 

minimum distribution. 

Section 401(a)(9)(H) (which was 

added as part of section 401 of the 

SECURE Act) provides special rules that 

generally apply to the distribution of an 

employee’s remaining interest in a 

defined contribution plan after the 

death of that employee. Specifically, 

section 401(a)(9)(H)(i) provides that, 

except in the case of a beneficiary who 

is not a designated beneficiary, section 

401(a)(9)(B)(ii): (1) Is applied by 

substituting 10 years for 5 years; and (2) 

applies whether or not distributions of 

the employee’s interest have begun in 

accordance with section 401(a)(9)(A). 

Section 401(a)(9)(H)(ii) provides that 

section 401(a)(9)(B)(iii) (permitting 

payments over the life or life expectancy 

of the designated beneficiary as an 

alternative to the 10-year rule) applies 

only in the case of an eligible designated 

beneficiary. Section 401(a)(9)(H)(iii) 

provides that if an eligible designated 

beneficiary dies before the employee’s 

interest is entirely distributed, then 

section 401(a)(9)(H)(ii) does not apply to 

the beneficiary of the eligible designated 

beneficiary, and the remainder of the 

employee’s interest must be distributed 

within 10 years after the death of the 

eligible designated beneficiary. 

Section 401(a)(9)(H)(iv) provides that 

in the case of an applicable multibeneficiary trust, if, under the terms of 

the trust, it is to be divided immediately 

upon the death of the employee into 

separate trusts for each beneficiary, then 

section 401(a)(9)(H)(ii) is applied 

separately with respect to the portion of 

the employee’s interest that is payable 

to any disabled or chronically ill eligible 

designated beneficiary. Section 

401(a)(9)(H)(iv) also provides that in the 

case of an applicable multi-beneficiary 

trust, if, under the terms of the trust, no 

individual (other than an eligible 

designated beneficiary who is disabled 

or chronically ill) has any right to the 

employee’s interest in the plan until the 

death of all of those disabled or 

chronically ill eligible designated 

beneficiaries with respect to the trust, 

then: (1) Section 401(a)(9)(B)(iii) 

(permitting payments over the life 

expectancy of a beneficiary) will apply 

to the distribution of the employee’s 

interest; and (2) any beneficiary who is 

not disabled or chronically ill will be 

treated as a beneficiary of the eligible 

designated beneficiary who is disabled 

or chronically ill upon the death of that 

eligible designated beneficiary. 

Section 401(a)(9)(H)(v) defines the 

term applicable multi-beneficiary trust 

as a trust: (1) Which has more than one 

beneficiary; (2) all of the beneficiaries of 

which are treated as designated 

beneficiaries for purposes of 

determining the distribution period 

pursuant to section 401(a)(9); and (3) at 

least one of the beneficiaries of which 

is an eligible designated beneficiary 

who is either disabled or chronically ill. 

Section 401(a)(9)(H)(vi) provides that, 

for purposes of applying section 

401(a)(9)(H), an eligible retirement plan 

defined in section 402(c)(8)(B) (other 

than a defined benefit plan described in 

section 402(c)(8)(B)(iv) or (v) or a 

qualified trust that is a part of a defined 

benefit plan) is treated as a defined 

contribution plan.1

Prior to amendment by section 114 of 

the SECURE Act, section 401(a)(9)(C) of 

the Code defined the required beginning 

date by reference to the calendar year in 

which the employee attains age 701⁄2. 

Section 114(d) of the SECURE Act 

provides that the amendments made by 

section 114 of the SECURE Act apply to 

distributions required to be made after 

December 31, 2019, with respect to 

individuals who attain age 701⁄2 after 

that date. 

Section 401(b)(1) of the SECURE Act 

provides that, generally, the 

amendments made to section 

401(a)(9)(E) and (H) of the Code apply 

to distributions with respect to 

employees who die after December 31, 

2019. 

Section 401(b)(2) of the SECURE Act 

provides that in the case of a plan 

maintained pursuant to one or more 

collective bargaining agreements 

between employee representatives and 

one or more employers that were 

ratified before December 20, 2019, the 

amendments to sections 401(a)(9)(E) and 

(H) of the Code apply to distributions 

with respect to employees who die in 

calendar years beginning after December 

31, 2021, or if earlier, the later of: (1) 

The date on which the last of the 

collective bargaining agreements 

terminated (without regard to any 

extension of the agreement to which the 

parties agree on or after December 20, 

2019), or (2) December 31, 2019. 

Section 401(b)(3) of the SECURE Act 

provides that in the case of a 

governmental plan (as defined in 

section 414(d) of the Code), the 

amendments to sections 401(a)(9)(E) and 

(H) will apply to distributions with 

respect to employees who die after 

December 31, 2021. 

Section 401(b)(4) of the SECURE Act 

provides that the amendments made to 

sections 401(a)(9)(E) and (H) of the Code 

do not apply to a qualified annuity that 

is a binding annuity contract in effect on 

December 20, 2019, and at all times 

thereafter.2

Section 401(b)(5) of the SECURE Act 

provides that if an employee dies before 

the effective date of section 401(a)(9)(H) 


jspears on DSK121TN23PROD with PROPOSALS3
10506 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

3A QPLO amount is defined in section 

402(c)(3)(C)(ii) as a plan loan offset amount that is 

distributed from a qualified employer plan to a 

participant or beneficiary solely by reason of: (1) 

The termination of the qualified employer plan, or 

(2) the failure to meet the repayment terms of the 

loan from the plan because of the severance from 

employment of the participant. 

of the Code for a plan, then, in applying 

the amendments made to sections 

401(a)(9)(E) and (H) to the employee’s 

designated beneficiary who dies on or 

after the effective date, (1) the 

amendments apply to any beneficiary of 

the designated beneficiary, and (2) the 

designated beneficiary is treated as an 

eligible designated beneficiary for 

purposes of section 401(a)(9)(H)(ii). 

Section 402(c)—Rollovers 

Section 402(c) provides rules related 

to the rollover of a distribution from a 

qualified plan to another eligible 

retirement plan. Prior to being amended 

by section 641 of the Economic Growth 

and Tax Relief Reconciliation Act of 

2001, Public Law 107–16, 115 Stat. 38 

(2001) (EGTRRA), section 402(c)(2) of 

the Code limited the portion of a 

distribution that could be rolled over to 

the amount that would have been 

includible in income in the absence of 

the rollover. Section 641 of EGTRRA 

and section 411(q) of the Job Creation 

and Worker Assistance Act of 2002, 

Public Law 107–147, 116 Stat. 21 

(2002), expanded the rollover rules to 

permit a rollover to an IRA of the 

portion of the distribution that would 

have been excluded from gross income 

in the absence of the rollover (that is, 

the portion of the amount distributed 

that consists of the employee’s 

investment in the contract). In addition, 

that portion may be transferred in a 

direct trustee-to-trustee transfer to a 

qualified trust or to an annuity contract 

described in section 403(b) of the Code, 

but only if the trust or annuity contract 

separately accounts for the amount that 

consists of the employee’s investment in 

the contract. If only a portion of an 

eligible rollover distribution is rolled 

over or transferred, then the amount 

rolled over or transferred is treated as 

consisting first of the portion of the 

distribution that is not allocable to the 

employee’s investment in the contract. 

Under section 402(c), any amount 

distributed from a qualified plan 

generally will be excluded from income 

if it is transferred to an eligible 

retirement plan no later than the 60th 

day following the day the distribution is 

received. Section 402(c)(3)(B) was 

added by section 644 of EGTRRA to 

provide that the Secretary may waive 

the 60-day rollover requirement in 

certain circumstances. Section 

402(c)(3)(C) was added to the Code by 

section 13613 of the Tax Cuts and Jobs 

Act, Public Law 115–97, 131 Stat. 2054 

(2017) (TCJA) to provide an extended 

rollover deadline for qualified plan loan 

offset (QPLO) amounts.3 Specifically, 

the deadline for rollover of any portion 

of a QPLO amount is extended so that 

it ends no earlier than the distributee’s 

tax filing due date (including 

extensions) for the taxable year in which 

the offset occurs. 

Subject to certain exclusions, section 

402(c)(4) provides that an eligible 

rollover distribution means any 

distribution to an employee of all or any 

portion of the balance to the credit of 

the employee in a qualified plan. 

Section 402(c)(4)(A) excludes from the 

definition of an eligible rollover 

distribution any distribution that is one 

of a series of substantially equal 

periodic payments payable for the life 

(or life expectancy) of the employee (or 

the employee and the employee’s 

designated beneficiary), or for a 

specified period of 10 years or more. 

Section 402(c)(4)(B) provides that any 

distribution that is required under 

section 401(a)(9) is excluded from the 

definition of an eligible rollover 

distribution. Section 402(c)(4)(C), which 

was added by section 636(b)(1) of 

EGTRRA, excludes hardship 

distributions from the definition of an 

eligible rollover distribution. 

Prior to being amended by section 641 

of EGTRRA, section 402(c)(8)(B) of the 

Code provided that the only type of 

eligible retirement plan permitted to 

receive a rollover from a qualified plan 

was another qualified plan or an IRA. 

Section 641 of EGTRRA amended 

section 402(c)(8)(B) to expand the list of 

retirement plans eligible to receive 

rollovers to include an annuity contract 

described in section 403(b) of the Code, 

and an eligible deferred compensation 

plan described in section 457(b) which 

is maintained by an eligible employer 

described in section 457(e)(1)(A). 

Section 617(c) of EGTRRA amended 

section 402(c)(8)(B) of the Code to 

provide that if any portion of an eligible 

rollover distribution is attributable to 

distributions from a designated Roth 

account (as defined in section 402A), 

that portion may be rolled over only to 

another designated Roth account or a 

Roth IRA (as described in section 408A). 

Section 641 of EGTRRA also added 

section 402(c)(10) to the Code to provide 

that an eligible deferred compensation 

plan described in section 457(b) 

maintained by an eligible employer 

described in section 457(e)(1)(A) may 

accept rollovers from a different type of 

eligible retirement plan only if it 

separately accounts for the amounts 

rolled into the plan. 

Section 402(c)(9) provides that, if any 

distribution attributable to an employee 

is paid to the spouse of the employee 

after the employee’s death, then section 

402(c) applies to that distribution in the 

same manner as if the spouse were the 

employee. At the time section 402(c)(9) 

was enacted, a surviving spouse was 

permitted to roll over an eligible 

rollover distribution only to an IRA. 

However, section 641 of EGTRRA 

amended section 402(c)(9) of the Code 

to expand the type of eligible retirement 

plan permitted to receive a spousal 

rollover to include not just an IRA, but 

also any other eligible retirement plan. 

Section 402(c)(11) of the Code was 

added by section 829 of the Pension 

Protection Act of 2006, Public Law 109– 

280, 120 Stat. 780 (2006) (PPA), to 

provide that an individual who is not 

the surviving spouse of the employee 

and who is a designated beneficiary (as 

defined by section 401(a)(9)(E) of the 

Code) may elect to have any portion of 

a distribution made in the form of a 

direct trustee-to-trustee transfer to an 

individual retirement plan established 

for the purpose of receiving that 

distribution. If a direct trustee-to-trustee 

transfer is made pursuant to section 

402(c)(11), then the required minimum 

distribution rules applicable to 

distributions after the employee’s death 

in section 401(a)(9)(B) (other than 

section 401(a)(9)(B)(iv)) will apply to 

the individual retirement plan. 

The rollover rules of section 402(c) 

also apply to a distribution from a 

section 403(a) qualified annuity plan, a 

section 403(b) plan, and an eligible 

deferred compensation plan described 

in section 457(b) maintained by an 

eligible employer described in section 

457(e)(1)(A). See sections 403(a)(4)(B), 

403(b)(8)(B), and 457(e)(16)(B), 

respectively. 

Sections 403(a), 403(b), 408, and 457— 

Other Arrangements Subject to Section 

401(a)(9) 

Under section 403(a)(1), a qualified 

annuity plan under section 403(a) must 

meet the requirements of section 

404(a)(2) (which provides that an 

annuity plan must satisfy the required 

minimum distribution rules under 

section 401(a)(9)). Sections 403(b)(10), 

408(a)(6), and 408(b)(3) provide that a 

section 403(b) plan, an individual 

retirement account, and an individual 

retirement annuity, respectively, must 

satisfy rules similar to the requirements 

of section 401(a)(9) and the incidental 

death benefit requirements of section 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10507 

4Final regulations under section 4974 (relating to 

excise taxes for excess accumulations in qualified 

plans) were published at the same time but have not 

been amended. 

401(a). Under section 457(b)(5) and 

(d)(2), a plan is an eligible deferred 

compensation plan described in section 

457(b) only if it satisfies the minimum 

distribution requirements of section 

401(a)(9). 

Section 4974—Excise Tax on Failure To 

Satisfy Section 401(a)(9) 

Section 4974(a) provides that if the 

amount distributed during the taxable 

year of a payee under any qualified 

retirement plan (as defined in section 

4974(c)) or any eligible deferred 

compensation plan (as defined in 

section 457(b)) is less than that taxable 

year’s minimum required distribution 

(as defined in section 4974(b)), then an 

excise tax is imposed on the payee equal 

to 50 percent of the amount by which 

the minimum required distribution for 

the taxable year exceeds the amount 

actually distributed in that taxable year. 

Section 4974(d) provides that if the 

taxpayer establishes to the satisfaction 

of the Secretary that the failure to 

distribute the entire amount required in 

a taxable year was due to reasonable 

error and reasonable steps are being 

taken to remedy that shortfall, then the 

Secretary may waive the excise tax 

imposed in section 4974(a) for that 

taxable year. 

Good Faith Compliance Standard for 

Governmental Plans 

Section 823 of PPA provides that a 

governmental plan (as defined in 

section 414(d) of the Code) is treated as 

having complied with section 401(a)(9) 

if the plan complies with a reasonable, 

good faith interpretation of section 

401(a)(9). 

Existing Regulations 

Final regulations relating to required 

minimum distributions from a qualified 

plan, an IRA, and a section 403(b) plan, 

have been subject to a series of 

amendments and additions since they 

were published in the Federal Register 

on April 17, 2002 (67 FR 18988).4 Final 

regulations relating to required 

minimum distributions from defined 

benefit plans and annuity contracts 

were published in the Federal Register 

on June 15, 2004 (69 FR 68077). Final 

regulations published in the Federal 

Register on September 8, 2009 (74 FR 

45993) updated the rules to permit a 

governmental plan to comply with the 

required minimum distribution rules 

using a reasonable, good faith 

interpretation of section 401(a)(9). Final 

regulations relating to qualified 

longevity annuity contracts were 

published in the Federal Register on 

July 2, 2014 (79 FR 37633). Final 

regulations published in the Federal 

Register on November 12, 2020 (85 FR 

72477) updated the life expectancy and 

distribution period tables for 

distribution calendar years that begin on 

or after January 1, 2022. 

Final regulations relating to section 

402(c) and eligible rollover distributions 

were published in the Federal Register 

on September 22, 1995 (60 FR 49199). 

Since those regulations were issued, 

section 402(c) has been amended several 

times, and guidance related to those 

amendments has generally been issued 

in the Internal Revenue Bulletin rather 

than through the issuance of new 

regulations. For example, Notice 2007– 

7, 2007–1 C.B. 395, provided guidance 

related to the amendments to section 

402(c) made by PPA. However, final 

regulations related to the extended 

period of time to roll over a QPLO 

amount under section 402(c)(3)(C) were 

published in the Federal Register on 

January 6, 2021 (86 FR 464). See 

§ 1.402(c)–3. 

Explanation of Provisions 

These proposed regulations would 

update several existing regulations 

under sections 401(a)(9), 402(c), 403(b), 

457, and 4974 to reflect statutory 

amendments that have been made since 

those regulations were last issued. 

These proposed regulations also clarify 

certain issues that have been raised in 

public comments and private letter 

ruling requests. These proposed 

regulations also replace the questionand-answer format of the existing 

regulations under sections 401(a)(9), 

402(c), 408, and 4974 with a standard 

format. Rules under the existing 

regulations that are retained in these 

proposed regulations are generally not 

discussed in this Explanation of 

Provisions. 

I. Section 401(a)(9) Regulations 

A. Section 1.401(a)(9)–1—Minimum 

Distribution Requirement in General 

1. Statutory Effective Date of the 

Limitation on Beneficiary Life 

Expectancy Distributions 

Proposed § 1.401(a)(9)–1 provides 

general rules that apply for all of the 

regulations under section 401(a)(9), 

including rules addressing application 

of the effective date of new section 

401(a)(9)(H), which was added by 

section 401 of the SECURE Act to limit 

life expectancy distributions for 

beneficiaries. Generally, the 

amendments made by section 401 of the 

SECURE Act apply to distributions with 

respect to an employee who dies on or 

after January 1, 2020 (with a later 

effective date for certain collectively 

bargained plans or governmental plans). 

In addition, if an employee in a plan 

died before the section 401(a)(9)(H) 

effective date for that plan, the 

employee had only one designated 

beneficiary, and the employee’s 

designated beneficiary dies on or after 

that effective date, then the amendments 

made by section 401 of the SECURE Act 

apply to any beneficiary of the 

designated beneficiary. In this situation, 

the designated beneficiary is treated as 

an eligible designated beneficiary for 

purposes of the 10-year payout required 

by section 401(a)(9)(H)(iii). Accordingly, 

the death of the designated beneficiary 

triggers a requirement to complete 

payment within 10 years of the death of 

that designated beneficiary. In contrast, 

if that designated beneficiary died 

before that effective date, then the 

amendments made by section 401 of the 

SECURE Act do not apply with respect 

to the employee’s interest under the 

plan. 

These proposed regulations provide 

that if an employee in a plan who dies 

before the section 401(a)(9)(H) effective 

date for that plan has more than one 

designated beneficiary, whether the 

amendments made by section 401 of the 

SECURE Act apply depends on when 

the oldest of those beneficiaries dies. 

Thus, for example, if an employee who 

died before January 1, 2020, named a 

see-through trust as the sole beneficiary 

of the employee’s interest in the plan, 

and the trust has three beneficiaries who 

are all individuals, then the 

amendments made by section 401 of the 

SECURE Act will apply with respect to 

distributions to the trust upon the death 

of the oldest trust beneficiary, but only 

if that beneficiary dies on or after the 

section 401(a)(9)(H) effective date for 

that plan. However, if the oldest of the 

trust beneficiaries died before that 

effective date, then the amendments 

made by section 401 of the SECURE Act 

do not apply with respect to 

distributions to the trust. 

For purposes of applying the statutory 

effective date, these proposed 

regulations provide that if, pursuant to 

section 401(a)(9)(B)(iv), a surviving 

spouse is waiting to begin distributions 

until the year for which the employee 

would have been first required to take 

distributions, then the spouse is treated 

as the employee. Thus, in that case, if 

the spouse died before January 1, 2020, 

but the spouse’s designated beneficiary 

dies after the section 401(a)(9)(H) 

effective date for the plan, section 

401(a)(9)(H) applies to any beneficiary 

of the spouse’s designated beneficiary 


jspears on DSK121TN23PROD with PROPOSALS3
10508 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

upon the death of that designated 

beneficiary. 

These proposed regulations reflect the 

statutory delay of the effective date for 

governmental plans and collectively 

bargained plans. For this purpose, the 

determination of whether a plan is a 

collectively bargained plan is made in 

accordance with § 1.436–1(a)(5)(ii)(B) 

(relating to plans under which some 

participants are not members of 

collective bargaining units). The 

proposed regulations also reflect the 

exception for existing annuity contracts 

for which an irrevocable election as to 

the method and the amount of the 

annuity payments was made before 

December 20, 2019, as described in 

section 401(b)(4) of the SECURE Act. 

2. Participants in Multiple Plans 

These proposed regulations provide 

that if an employee is a participant in 

more than one plan, the plans in which 

the employee participates are not 

permitted to be aggregated for purposes 

of testing whether the distribution 

requirements of section 401(a)(9) are 

met. This rule is currently in 

§ 1.401(a)(9)–8, Q&A–1, but is moved to 

§ 1.401(a)(9)–1(a)(2) in these proposed 

regulations. 

B. Section 1.401(a)(9)–2—Distributions 

Commencing During an Employee’s 

Lifetime 

Proposed § 1.401(a)(9)–2 provides 

rules for determining the required 

beginning date for distributions and 

whether distributions are treated as 

having begun during an employee’s 

lifetime. These rules are based on the 

rules in the existing regulations, except 

that the rules have been updated to 

reflect the amendments to the required 

beginning date made by section 114 of 

the SECURE Act. 

In accordance with section 114(a) of 

the SECURE Act, these proposed 

regulations generally provide that the 

required beginning date is April 1 of the 

calendar year following the later of (1) 

the calendar year in which the 

employee attains age 72, and (2) the 

calendar year in which the employee 

retires from employment with the 

employer maintaining the plan. These 

proposed regulations also provide that 

for an employee who was born before 

July 1, 1949, the required beginning date 

remains April 1 of the calendar year 

following the later of (1) the calendar 

year in which the employee attains age 

701⁄2, and (2) the calendar year in which 

the employee retires from employment 

with the employer maintaining the plan. 

However, if an employee is a 5-percent 

owner, then the required beginning date 

is April 1 of the calendar year following 

the calendar year in which the 

employee attains age 701⁄2 or 72 

(whichever required beginning date 

applies to the employee as determined 

using the employee’s date of birth), and 

that required beginning date applies 

regardless of whether the employee has 

retired from employment with the 

employer maintaining the plan. 

Section 114(d) of the SECURE Act 

provides that the amended definition of 

the required beginning date applies with 

respect to employees who attain age 

701⁄2 on or after January 1, 2020. This 

effective date provision could be 

interpreted to require the employee to 

survive until age 701⁄2 in order to have 

the amended definition apply (that is, if 

the employee died before attaining age 

701⁄2, then the amended definition 

would not apply with respect to 

distributions to that employee’s 

beneficiary, even if the employee would 

have attained age 701⁄2 on or after 

January 1, 2020, had the employee 

survived). Instead, for ease of 

administration, these proposed 

regulations interpret the effective date 

language to apply the amendments 

made by section 114 of the SECURE Act 

to an employee who died before 

attaining age 701⁄2 if the employee 

would have attained age 701⁄2 on or after 

January 1, 2020 (that is, the employee’s 

date of birth is on or after July 1, 1949). 

This interpretation also extends to a 

surviving spouse who is waiting to 

begin distributions pursuant to section 

401(a)(9)(B)(iv). Thus, for example, if an 

employee who was born on June 1, 

1952, died in 2018, and the employee’s 

sole beneficiary is the employee’s 

surviving spouse, then the surviving 

spouse may wait until 2024 (the 

calendar year in which the employee 

would have attained age 72) to begin 

receiving distributions. 

C. Section 1.401(a)(9)–3—Death Before 

Required Beginning Date 

Proposed § 1.401(a)(9)–3 provides 

rules for distributions if an employee 

dies before the employee’s required 

beginning date. These rules are based on 

the rules in the existing regulations but 

are updated to reflect new section 

401(a)(9)(H). Because section 

401(a)(9)(H) applies only to defined 

contribution plans, the rules for 

distributions from defined benefit plans 

and defined contribution plans have 

been separated, with the rules for 

distributions from defined benefit plans 

set forth in proposed § 1.401(a)(9)–3(b) 

and the rules for distributions from 

defined contribution plans set forth in 

proposed § 1.401(a)(9)–3(c). 

Section 401(a)(9)(H)(i) provides for a 

new 10-year distribution period in 

certain cases (10-year rule). Specifically, 

in the case of a defined contribution 

plan, if an employee who has a 

designated beneficiary dies before the 

employee’s required beginning date, 

then section 401(a)(9)(B)(ii) is satisfied 

if the employee’s entire interest is 

distributed by the end of the calendar 

year that includes the tenth anniversary 

of the employee’s death. This 10-year 

rule is similar to the 5-year rule in the 

existing regulations (under which 

distributions may be delayed until the 

end of the fifth calendar year following 

the calendar year of the employee’s 

death if the employee dies before the 

required beginning date) and permits 

distributions to be delayed until the end 

of the tenth calendar year following the 

calendar year of the employee’s death if 

the employee dies before the required 

beginning date. 

The 5-year rule is retained in these 

proposed regulations and continues to 

apply to a defined benefit plan. It also 

applies to a defined contribution plan if 

section 401(a)(9)(H) does not apply to 

the employee (which could occur if the 

employee does not have a designated 

beneficiary or if the employee died 

before the effective date of section 

401(a)(9)(H) and the employee’s 

designated beneficiary elected the 5- 

year rule). 

These proposed regulations retain the 

rule that permits an employee’s interest 

to be distributed over the designated 

beneficiary’s life or life expectancy in 

accordance with section 401(a)(9)(B)(iii) 

(life expectancy payments rule). 

However, pursuant to section 

401(a)(9)(H)(ii), in the case of a defined 

contribution plan, that rule is available 

only if the designated beneficiary is an 

eligible designated beneficiary as 

defined in section 401(a)(9)(E)(ii). Thus, 

in the case of a defined contribution 

plan, if the employee dies before the 

required beginning date and the 

employee’s designated beneficiary is not 

an eligible designated beneficiary, the 

10-year rule applies. 

These proposed regulations also 

provide that in the case of a defined 

contribution plan, if the employee has a 

designated beneficiary who is an 

eligible designated beneficiary, the plan 

may provide either that the 10-year rule 

applies or that the life expectancy 

payments rule applies. Alternatively, 

the plan may provide the employee or 

the eligible designated beneficiary an 

election between the 10-year rule or the 

life expectancy payments rule. 

However, if a defined contribution plan 

does not include either of those optional 

provisions and the employee has an 

eligible designated beneficiary, the plan 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10509 

must provide for the life expectancy 

payments rule. 

D. Section 1.401(a)(9)–4—Determination 

of the Designated Beneficiary 

Proposed § 1.401(a)(9)–4 provides 

rules addressing the determination of 

the employee’s beneficiary for purposes 

of section 401(a)(9) and these proposed 

regulations are substantially similar to 

the rules in the existing regulations. In 

addition to providing rules addressing 

the new definition of eligible designated 

beneficiary, these proposed regulations 

include rules that clarify and simplify 

the determination of a beneficiary for 

purposes of section 401(a)(9) in certain 

situations involving the use of a trust. 

A designated beneficiary within the 

meaning of section 401(a)(9)(E)(i) 

generally is an individual designated 

under the plan as a beneficiary who is 

entitled to a portion of an employee’s 

benefit, contingent on the employee’s 

death or another specified event. If a 

beneficiary designated under the plan is 

a person other than an individual, then 

the employee is treated as not having a 

designated beneficiary (even if there is 

an individual who is designated as a 

beneficiary under the plan). However, if 

a beneficiary designated under the plan 

is a see-through trust as described in 

Section I.D.2 of this Explanation of 

Provisions, then certain beneficiaries of 

that trust are treated as the employee’s 

beneficiaries under the plan rather than 

the trust. In addition, designating a 

person that is not an individual as a 

beneficiary under the plan does not 

cause the employee to be treated as not 

having a designated beneficiary to the 

extent separate account treatment 

applies with respect to that person as 

described in Section I.H of this 

Explanation of Provisions. 

1. Eligible Designated Beneficiaries 

These proposed regulations 

incorporate the new definition of 

eligible designated beneficiary in 

section 401(a)(9)(E)(ii). Specifically, an 

eligible designated beneficiary is a 

designated beneficiary who, as of the 

date of the employee’s death, is (1) the 

surviving spouse of the employee, (2) a 

child of the employee who has not yet 

reached the age of majority, (3) disabled, 

(4) chronically ill, or (5) not more than 

10 years younger than the employee. 

a. Definition of Age of Majority 

Section 401(a)(9)(E)(ii)(II) provides 

that if the employee’s designated 

beneficiary, as of the date of the 

employee’s death, is a child of the 

employee who has not yet reached the 

age of majority (as defined in section 

401(a)(9)(F)), then that child is an 

eligible designated beneficiary. Section 

1.401(a)(9)–6, A–15, of the existing 

regulations provides guidance regarding 

the application of section 401(a)(9)(F). 

That regulatory provision does not 

specify a particular age as a generally 

applicable age of majority, but provides 

that a child may be treated as having not 

reached the age of majority if the child 

has not completed a specified course of 

education and is under the age of 26. 

The Treasury Department and the IRS 

have determined that it is necessary to 

revise the definition of age of majority 

from the definition used under the 

existing regulations (the pre-SECURE 

Act application of which is limited to 

defined benefit plans and rarely 

applied). As more plans are expected to 

apply an age of majority definition, 

plans may find it difficult to implement 

the existing standard under which the 

plan administrator obtains information 

about the education of an employee’s 

child for purposes of applying section 

401(a)(9)(H). Furthermore, because the 

definition of age of majority is intended 

to apply to all of an individual’s 

accounts in defined contribution plans, 

which may be in multiple qualified 

plans and IRAs, the Treasury 

Department and the IRS have concluded 

that the definition, which will 

determine whether a designated 

beneficiary is an eligible designated 

beneficiary across plans and accounts, 

should not be a plan design choice. The 

potential for different plans to have 

different definitions would lead to 

confusion and complexity for 

individuals in planning and for their 

beneficiaries, as well as plan 

administrators and custodians, in 

determining payment streams. 

Accordingly, for purposes of section 

401(a)(9)(E)(ii)(II) and (F), these 

proposed regulations provide that a 

child of the employee reaches the age of 

majority on that child’s 21st birthday 

(which accommodates the age of 

majority definition in all of the States). 

However, as described in Section I.F of 

this Explanation of Provisions, the 

proposed regulations permit defined 

benefit plans that have used the prior 

definition of age of majority to retain 

that plan provision. 

b. Definition of Disability 

These proposed regulations provide 

rules for the determination of whether 

an individual is disabled for purposes of 

section 401(a)(9). Section 

401(a)(9)(E)(ii)(III) applies the definition 

of disability under section 72(m)(7) for 

purposes of section 401(a)(9). Section 

72(m)(7) provides a standard of 

disability based on whether an 

individual is unable to engage in 

substantial gainful activity. However, 

for individuals under age 18, that 

standard may be difficult to apply. 

Accordingly, if, as of the date of the 

employee’s death, a beneficiary is 

younger than age 18, the proposed 

regulations apply a comparable standard 

that requires the beneficiary to have a 

medically determinable physical or 

mental impairment that results in 

marked and severe functional 

limitations, and that can be expected to 

result in death or to be of longcontinued and indefinite duration. 

These proposed regulations also 

provide a safe harbor for the 

determination of whether a beneficiary 

is disabled. Specifically, if, as of the 

date of the employee’s death, the 

Commissioner of Social Security has 

determined that the individual is 

disabled within the meaning of 42 

U.S.C. 1382c(a)(3), then that individual 

will be deemed to be disabled for 

purposes of section 401(a)(9). 

Pursuant to section 401(a)(9)(E)(ii), 

the determination of whether a 

beneficiary is disabled is made as of the 

date of the employee’s death. For 

example, if, as of the employee’s death, 

the employee’s designated beneficiary is 

the employee’s 10-year-old child who is 

not disabled but who becomes disabled 

5 years after the employee’s death, then 

pursuant to section 401(a)(9)(E)(iii) and 

these proposed regulations, that child’s 

later disability will not be taken into 

account, and that child will cease to be 

an eligible designated beneficiary on the 

child’s 21st birthday. 

c. Documentation Requirements for 

Disabled or Chronically Ill Status 

These proposed regulations provide 

that, with respect to a beneficiary who 

is disabled or chronically ill as of the 

date of the employee’s death, 

documentation of the disability or 

chronic illness must be provided to the 

plan administrator no later than October 

31 of the calendar year following the 

calendar year of the employee’s death. 

If the designated beneficiary is 

chronically ill under any of the 

definitions in section 7702B(c)(2)(A) as 

of the date of the employee’s death, the 

documentation must include a 

certification by a licensed health care 

practitioner (as defined in section 

7702B(c)(4)) that the designated 

beneficiary is chronically ill. 

Additionally, in accordance with 

section 401(a)(9)(E)(ii)(IV), if the 

beneficiary is chronically ill under the 

definition in section 7702B(c)(2)(A)(i), 

then the documentation also must 

include a certification from a licensed 

health care practitioner that, as of the 

date of the certification, the individual 


jspears on DSK121TN23PROD with PROPOSALS3
10510 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

5These proposed regulations provide for the 

determination of the trust beneficiaries that are 

treated as beneficiaries of the employee in 

§ 1.401(a)(9)–4(f). In the existing regulations, these 

provisions were in § 1.401(a)(9)–5. 

6For purposes of this rule, a beneficiary is treated 

as having predeceased the employee if the 

beneficiary is treated as predeceasing the employee 

pursuant to a simultaneous death provision or a 

qualified disclaimer. 

is unable to perform (without 

substantial assistance from another 

individual) at least 2 activities of daily 

living for an indefinite period that is 

reasonably expected to be lengthy in 

nature. 

For a designated beneficiary who is an 

eligible designated beneficiary because, 

at the time of the employee’s death, the 

designated beneficiary is the employee’s 

minor child and that child also is 

disabled or chronically ill within the 

meaning of these proposed regulations, 

the designated beneficiary will continue 

to be treated as an eligible designated 

beneficiary after reaching the age of 

majority (on account of being disabled 

or chronically ill) only if these 

documentation requirements are timely 

met with respect to that designated 

beneficiary. Similarly, if the employee’s 

designated beneficiary is the employee’s 

surviving spouse and that spouse also is 

disabled or chronically ill at the time of 

the employee’s death, then the surviving 

spouse will be treated as disabled or 

chronically ill for purposes of the 

applicable multi-beneficiary trust rules 

only if the documentation requirements 

are timely met with respect to the 

surviving spouse. 

d. Other Rules Related to Eligible 

Designated Beneficiaries 

These proposed regulations provide 

that, if an employee has more than one 

designated beneficiary and one of them 

is not an eligible designated beneficiary, 

then for purposes of section 401(a)(9), 

the employee generally is treated as not 

having an eligible designated 

beneficiary. In addition, these proposed 

regulations provide that if the surviving 

spouse is waiting to begin distributions 

until the year in which the employee 

would have attained age 72 and the 

surviving spouse dies before the 

beginning of that year, then the 

determination of whether the surviving 

spouse’s designated beneficiary is an 

eligible designated beneficiary is made 

by substituting the surviving spouse for 

the employee (including for purposes of 

establishing the date as of which that 

determination is made). For example, a 

child of the surviving spouse is an 

eligible designated beneficiary if the 

child has not yet reached the age of 

majority as of the date of the surviving 

spouse’s death. 

2. Trust as Beneficiary 

These proposed regulations retain the 

see-through trust concept in the existing 

regulations under which certain 

beneficiaries of a trust are treated as 

beneficiaries of the employee if the trust 

meets the requirements to be a seethrough trust. Specifically, to be a seethrough trust, the trust must meet the 

following requirements: (1) The trust is 

valid under state law or would be valid 

but for the fact that there is no corpus; 

(2) the trust is irrevocable or will, by its 

terms, become irrevocable upon the 

death of the employee; (3) the 

beneficiaries of the trust who are 

beneficiaries with respect to the trust’s 

interest in the employee’s benefit are 

identifiable; and (4) the specified 

documentation requirements are 

satisfied. 

In response to issues raised in private 

letter ruling requests and comments 

submitted to the Treasury Department 

and the IRS, these proposed regulations 

provide additional guidance in 

determining which beneficiaries of the 

see-through trust are treated as 

beneficiaries of the employee.5 These 

proposed rules are consistent with the 

examples that are in § 1.401(a)(9)–5, 

Q&A–7(c), of the existing regulations, 

but address many more fact patterns. 

The Treasury Department and the IRS 

intend for these more detailed rules to 

address many of the issues raised in 

comment letters and private letter ruling 

requests and expect that this more 

comprehensive and definitive guidance 

will minimize the need for taxpayers to 

request private letter rulings. 

a. Determining Which See-Through 

Trust Beneficiaries Are Treated as 

Beneficiaries of the Employee 

1. See-Through Trust Beneficiaries 

Taken Into Account 

Generally, the proposed regulations 

provide that a beneficiary of a seethrough trust is treated as a beneficiary 

of the employee if the beneficiary could 

receive amounts in the trust 

representing the employee’s interest in 

the plan that are neither contingent 

upon nor delayed until the death of 

another trust beneficiary who does not 

predecease (and is not treated as having 

predeceased) 6 the employee. 

Whether any other see-through trust 

beneficiary also is treated as a 

beneficiary of the employee depends 

upon whether the see-through trust is a 

conduit trust or accumulation trust. A 

conduit trust is defined in the proposed 

regulations as a see-through trust, the 

terms of which provide that all plan 

distributions will, upon receipt by the 

trustee, be paid directly to, or for the 

benefit of, specified beneficiaries. A seethrough trust will not fail to be a 

conduit trust merely because the trust 

terms do not require an immediate 

distribution after the death of all of the 

specified beneficiaries described in the 

preceding sentence. 

For example, if an employee names a 

conduit trust as the beneficiary of the 

employee’s interest in a plan and the 

trust terms require all distributions from 

the plan to the trust during the 

surviving spouse’s life to be distributed 

immediately to that surviving spouse, 

then the surviving spouse is treated as 

a beneficiary of the employee because 

the surviving spouse could receive 

amounts in the trust that are neither 

contingent upon nor delayed until the 

death of another trust beneficiary. In 

this case, if distributions have begun 

from the plan and the surviving spouse 

dies before the employee’s entire 

interest is distributed, any beneficiary 

who could receive distributions from 

the conduit trust at the time of the 

surviving spouse’s death is not treated 

as a beneficiary of the employee because 

that beneficiary’s ability to receive 

amounts from the trust is contingent 

upon the death of the surviving spouse. 

An accumulation trust is any seethrough trust that is not a conduit trust, 

and under an accumulation trust, there 

are potentially more beneficiaries. A 

beneficiary of an accumulation trust is 

treated as a beneficiary of the employee 

if that beneficiary has a residual interest 

in the portion of the trust representing 

the employee’s interest in the plan (that 

is, the beneficiary could receive 

amounts in the trust, representing the 

employee’s interest in the plan, that 

were not distributed to individuals 

described in the first paragraph of this 

Section I.D.2.a.1). For example, assume 

an employee names a see-through trust 

as the sole beneficiary of the employee’s 

interest in the plan. The terms of the 

see-through trust require the trustee to 

pay specified amounts from the trust to 

the employee’s surviving spouse, and 

those specified amounts do not include 

the immediate payment of plan 

distributions made to the trust. Upon 

the spouse’s death, the see-through trust 

is to terminate and the amounts 

remaining in the trust are to be paid to 

the employee’s brother. The surviving 

spouse is treated as a beneficiary of the 

employee (because the surviving spouse 

could receive amounts in the seethrough trust that are neither contingent 

upon nor delayed until the death of 

another trust beneficiary). Moreover, 

because not all distributions from the 

plan to the see-through trust are 

immediately distributed to a trust 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10511 

beneficiary, the trust is an accumulation 

trust. As a result, the employee’s brother 

is treated as a beneficiary of the 

employee because he has a residual 

interest in the see-through trust (that is, 

he could receive amounts in the trust 

representing the employee’s interest in 

the plan that were not distributed to the 

surviving spouse). 

2. Disregarded Beneficiaries of SeeThrough Trusts 

These proposed regulations also 

provide for certain beneficiaries of a seethrough trust to be disregarded as 

beneficiaries of the employee for 

purposes of section 401(a)(9), because 

they have only minimal or remote 

interests. Specifically, a see-through 

trust beneficiary is not treated as a 

beneficiary of the employee if that 

beneficiary could receive payments 

from the trust that represent the 

employee’s interest in the plan only 

after the death of another trust 

beneficiary whose sole interest is a 

residual interest in the trust (as 

described in the preceding paragraph) 

and who did not predecease (and is not 

treated as having predeceased) the 

employee. Thus, using the example in 

the preceding paragraph, assume the 

see-through trust terms provide that if 

the employee’s brother survives the 

employee but predeceases the surviving 

spouse, then the amounts remaining in 

the trust after the death of the surviving 

spouse are to be paid to a charity. In that 

case, the charity is disregarded as a 

beneficiary of the employee because the 

charity could receive only amounts in 

the trust that are contingent upon the 

death of the employee’s brother, whose 

only interest was a residual interest 

(that is, an interest in the amounts 

remaining in the trust after the death of 

the surviving spouse). In contrast, the 

charity would be treated as a beneficiary 

of the employee if the brother could 

receive amounts in the trust not subject 

to any contingencies or contingent upon 

an event other than the death of the 

surviving spouse (such as the surviving 

spouse’s remarriage). 

These proposed regulations provide 

another exception under which a seethrough trust beneficiary with a residual 

interest is disregarded as a beneficiary 

of the employee because the beneficiary 

would have only a minimal or remote 

interest in the trust. These proposed 

regulations provide that if the seethrough trust terms require a full 

distribution of amounts in the trust 

representing the employee’s interest in 

the plan to a specified individual 

described in the first paragraph of 

Section I.D.2.a.1 of this Explanation of 

Provisions by the later of: (1) The 

calendar year following the calendar 

year of the employee’s death; and (2) the 

end of the tenth calendar year following 

the calendar year in which that 

specified individual attains the age of 

majority, then any other beneficiary 

whose sole entitlement to distributions 

is conditioned on the unlikely event 

that specified individual dies before the 

full distribution is required is 

disregarded as a beneficiary of the 

employee. 

To illustrate this exception, assume 

an employee names a see-through trust 

as the sole beneficiary, the trust permits 

specified amounts to be paid to the 

employee’s niece until the niece reaches 

age 31 (age of majority plus 10 years), 

and those specified amounts are not 

required to include the immediate 

payment of plan distributions made to 

the trust. The trust is scheduled to 

terminate with a full distribution of all 

trust assets to the niece when the niece 

reaches age 31, but if the niece dies 

before this scheduled termination, then 

the amounts remaining in the trust will 

be paid to the employee’s sibling. In that 

case, the only beneficiary designated 

under the plan for purposes of section 

401(a)(9) and these regulations is the 

employee’s niece because the 

employee’s sibling is disregarded under 

the exception described in the 

preceding paragraph. However, if the 

see-through trust terms do not require a 

full distribution of amounts in the trust 

representing the employee’s interest in 

the plan until the niece reaches age 35, 

then this exception does not apply, and 

both the employee’s niece and sibling 

are treated as beneficiaries designated 

under the plan for purposes of section 

401(a)(9) and these regulations. 

b. Identifiability of Trust Beneficiaries 

These proposed regulations retain the 

requirement from the existing 

regulations that the employee’s 

beneficiaries (including beneficiaries of 

a see-through trust) be identifiable, but 

modify the definition of identifiability 

in light of the enactment of section 

401(a)(9)(H). Generally, trust 

beneficiaries are identifiable if it is 

possible to identify each person 

designated by the employee as eligible 

to receive a portion of the employee’s 

interest in the plan through the trust. 

Under the proposed regulations, if an 

employee names a class of individuals 

as the beneficiary (such as the 

employee’s grandchildren), the addition 

of another member of that class (for 

example, the birth of another 

grandchild) will not cause the trust to 

fail to meet the identifiability 

requirements. 

These proposed regulations provide 

another exception to the general 

identifiability rule under which a trust 

will not fail to satisfy the identifiability 

requirements merely because an 

individual has a power of appointment 

with respect to a portion of the 

employee’s interest in the plan. 

Specifically, these proposed regulations 

provide that if, by September 30 of the 

calendar year following the calendar 

year of the employee’s death, the power 

is exercised in favor of one or more 

beneficiaries that are identifiable or is 

restricted so that any appointment made 

at a later time may only be made in 

favor of one or more identifiable 

beneficiaries, then all of those 

identifiable beneficiaries are taken into 

account as beneficiaries of the 

employee. If the power is not exercised 

by that September 30 in favor of one or 

more beneficiaries that are identifiable 

(and is not so restricted) then each taker 

in default (that is, each person who 

would be entitled to the portion subject 

to the power if that power is not 

exercised) is treated as a beneficiary of 

the employee. 

These proposed regulations include a 

rule that applies when a beneficiary is 

added who was not initially taken into 

account in determining the employee’s 

beneficiaries. Under this rule, if a 

beneficiary is added after September 30 

of the calendar year following the 

calendar year of the employee’s death 

(for example, if an individual exercises 

a power of appointment after that 

September 30), then the determination 

of whether there is no designated 

beneficiary because one of the 

employee’s beneficiaries is not an 

individual, and the rules relating to 

multiple designated beneficiaries 

described in Sections I.D.1.d and I.E.3.d 

of this Explanation of Provisions must 

be applied taking into account the new 

beneficiary along with all of the 

beneficiaries that were taken into 

account before the addition of the new 

beneficiary. However, if the addition of 

the beneficiary would cause a full 

distribution of the employee’s interest 

in the plan to be required pursuant to 

section 401(a)(9)(H) during the calendar 

year in which the beneficiary is added 

or in an earlier calendar year (and a full 

distribution would not have been 

required in the absence of the new 

beneficiary), then the proposed 

regulations provide that the full 

distribution is not required until the end 

of the calendar year following the 

calendar year in which the beneficiary 

was added. 

To illustrate this rule, assume an 

employee named a see-through trust as 

the beneficiary of the employee’s 


jspears on DSK121TN23PROD with PROPOSALS3
10512 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

interest in the plan, the terms of the 

trust require the trustee to pay specified 

amounts from the trust to the 

employee’s surviving spouse, and those 

specified amounts do not require the 

immediate payment of plan 

distributions made to the trust. In this 

case, the trust is an accumulation trust. 

The trust terms also provide the spouse 

with a testamentary power of 

appointment to name the beneficiary of 

any portion of the employee’s interest in 

the plan that has not been distributed 

before the surviving spouse dies, but in 

the absence of an appointment, the 

employee’s only child is entitled to that 

residual interest in the trust. If the 

power of appointment is not exercised 

by September 30 of the calendar year 

following the calendar year of the 

employee’s death, then the trust does 

not fail to satisfy the identifiability 

requirements, and both the employee’s 

surviving spouse and child are treated 

as beneficiaries of the employee. If, after 

that September 30, the surviving spouse 

exercises the power by naming the 

spouse’s sibling as the beneficiary of the 

residual interest in the trust, then the 

employee’s surviving spouse, the 

employee’s child, and the spouse’s 

sibling are all taken into account when 

applying the rules for multiple 

designated beneficiaries for each 

calendar year after the year during 

which the sibling is added as a 

beneficiary. 

These proposed regulations also 

provide that a see-through trust will not 

fail to satisfy the identifiability 

requirements merely because the trust is 

subject to state law that permits the trust 

terms to be modified after the death of 

the employee (such as by a court 

reformation, through a decanting, or 

otherwise), thus permitting a change in 

the beneficiaries of the trust. If a 

beneficiary of a see-through trust is 

removed through a modification of the 

trust terms by September 30 of the 

calendar year following the calendar 

year of the employee’s death, the 

proposed regulations provide that the 

beneficiary that was removed is 

disregarded as a beneficiary of the 

employee for purposes of section 

401(a)(9) and these regulations. 

Similarly, if a beneficiary is added 

pursuant to such a modification, that 

beneficiary is taken into account as a 

beneficiary of the employee for 

purposes of section 401(a)(9) and these 

regulations. However, if a beneficiary is 

added pursuant to such a modification 

after that September 30, then the rules 

that apply to a beneficiary that is added 

pursuant to a power of appointment will 

apply also to a beneficiary that is added 

pursuant to the modification. 

c. Applicable Multi-Beneficiary Trusts 

These proposed regulations also 

provide guidance on a particular type of 

see-through trust defined in section 

401(a)(9)(H)(v) as an applicable multibeneficiary trust. Specifically, these 

proposed regulations define two types 

of applicable multi-beneficiary trusts. A 

type I applicable multi-beneficiary trust 

is an applicable multi-beneficiary trust, 

the terms of which provide that the trust 

is to be divided immediately upon the 

death of the employee into separate 

trusts for each beneficiary (as described 

in section 401(a)(9)(H)(iv)(I)). A type II 

applicable multi-beneficiary trust is an 

applicable multi-beneficiary trust, the 

terms of which provide that no 

individual other than a disabled or 

chronically ill eligible designated 

beneficiary has any right to the 

employee’s interest in the plan until the 

death of all such eligible designated 

beneficiaries with respect to the trust (as 

described in section 401(a)(9)(H)(iv)(II)). 

When dividing a type I applicable 

multi-beneficiary trust, one of the 

separate trusts could be a type II 

applicable multi-beneficiary trust. Thus, 

if a type I applicable multi-beneficiary 

trust is divided into separate trusts and 

one of the separate trusts satisfies the 

requirements to be a type II applicable 

multi-beneficiary trust, then the 

beneficiaries of that separate trust who 

are not disabled or chronically ill are 

disregarded as beneficiaries of the 

employee for purposes of section 

401(a)(9) and these regulations. 

However, for any separate trust that 

does not satisfy the requirements to be 

a type II applicable multi-beneficiary 

trust, the beneficiaries of that separate 

trust are treated as beneficiaries of the 

employee for purposes of section 

401(a)(9) and these regulations. 

The Treasury Department and the IRS 

are aware of concerns related to the 

application of the amendments made by 

section 401 of the SECURE Act to 

section 401(a)(9) of the Code in the case 

of a trust with terms intended to ensure 

that a disabled individual who is a 

beneficiary of the trust remains eligible 

for means-tested government benefits. 

The Treasury Department and the IRS 

request comments on whether under 

applicable law a trust for a disabled 

individual (for example, a supplemental 

needs trust) could include terms 

providing that the disabled individual 

would lose the individual’s interest in 

the trust in the event the interest would 

disqualify the individual for meanstested government benefits and still 

satisfy the requirements under the Code 

to be a type II applicable multibeneficiary trust. Specifically, 

comments are requested on whether this 

type of provision may be included in a 

trust (thereby allowing a disabled 

individual to continue to qualify for 

means-tested government benefits), 

while not providing for trust payments 

to any other beneficiary until the death 

of the disabled individual. 

3. Other Rules Related to Designated 

Beneficiaries. 

a. Special Rules for Multiple Designated 

Beneficiaries 

As described in the first paragraph of 

Section I.D.1.d of this Explanation of 

Provisions, these proposed regulations 

provide a general rule under which, if 

an employee has more than one 

designated beneficiary, and at least one 

of them is not an eligible designated 

beneficiary, then for purposes of section 

401(a)(9), the employee is treated as not 

having an eligible designated 

beneficiary. As a result, the employee’s 

interest must be distributed no later 

than the end of the tenth calendar year 

following the calendar year of the 

employee’s death. 

These proposed regulations include 

two exceptions to this general rule that 

allow an eligible designated beneficiary 

to use the life expectancy rule even if 

there is another designated beneficiary 

who is not an eligible designated 

beneficiary. The first exception is that if 

any of the employee’s designated 

beneficiaries is a child of the employee 

who, as of the date of the employee’s 

death, has not yet reached the age of 

majority, then the employee is still 

treated as having an eligible designated 

beneficiary (which allows payments to 

continue until 10 years after the child 

reaches the age of majority even if there 

are other designated beneficiaries who 

are not eligible designated 

beneficiaries). The second exception is 

if the see-through trust is a type II 

applicable multi-beneficiary trust, then 

the beneficiaries who either are disabled 

or chronically ill are treated as eligible 

designated beneficiaries without regard 

to whether any of the other trust 

beneficiaries are not eligible designated 

beneficiaries. 

To illustrate these rules, if an 

employee who is a participant in a 

defined contribution plan names a seethrough trust as the sole beneficiary of 

the employee’s interest in the plan, and 

the trust beneficiaries are the 

employee’s surviving spouse and the 

employee’s adult child who is not 

disabled or chronically ill, then the 

employee is treated as not having an 

eligible designated beneficiary. As a 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10513 

result, the employee’s entire interest 

must be distributed no later than 10 

years after the employee’s death. 

However, if there is another designated 

beneficiary who is the employee’s child 

and who, as of the date of the 

employee’s death, has not yet reached 

the age of majority, then, under the 

exception described in the preceding 

paragraph, the employee is treated as 

having an eligible designated 

beneficiary. In that second situation, if 

the trust is receiving annual 

distributions using the life expectancy 

rule, then a full distribution from the 

plan would not be required until ten 

years after the minor child reaches the 

age of majority. 

b. Determining the Beneficiary for 

Purposes of Calculating the Required 

Minimum Distribution 

These proposed regulations largely 

retain the rules of the existing 

regulations related to determining who 

is a beneficiary for purposes of section 

401(a)(9), so that a person is a 

beneficiary if that person is a 

beneficiary designated under the plan as 

of the date of the employee’s death and 

remains a beneficiary as of September 

30 of the calendar year following the 

calendar year in which the employee 

died. For this purpose, a beneficiary 

need not be specified by name in order 

to be designated under the plan, 

provided the beneficiary is identifiable 

pursuant to the designation. 

The existing regulations provide that 

a beneficiary is disregarded if certain 

events occur before September 30 of the 

calendar year following the calendar 

year in which the employee dies. In 

response to issues raised in private 

letter ruling requests and comments 

submitted to the Treasury Department 

and the IRS, these proposed regulations 

provide an exclusive list of events that 

permit a beneficiary to be disregarded. 

Specifically, the proposed regulations 

provide that if any of the following 

events occurs by September 30 of the 

calendar year following the calendar 

year in which the employee dies with 

respect to a person who was a 

beneficiary as of the employee’s date of 

death, then that person will be 

disregarded in identifying the 

beneficiaries of the employee for 

purposes of section 401(a)(9): (1) The 

individual predeceases the employee; 

(2) the individual is treated as having 

predeceased the employee pursuant to a 

simultaneous death provision or 

pursuant to a qualified disclaimer that 

satisfies section 2518 and applies to the 

entire interest to which the beneficiary 

is entitled; or (3) the person receives the 

entire benefit to which the person is 

entitled. 

To illustrate the rule in the preceding 

paragraph, if an individual makes a 

disclaimer satisfying section 2518 that 

applies to the individual’s entire 

interest (including the requirement that 

the disclaimer be made within 9 months 

of the employee’s death), that individual 

is not treated as a beneficiary for 

purposes of section 401(a)(9). However, 

if the disclaimer is executed more than 

9 months after the employee’s death, 

then that individual will not be 

disregarded for purposes of identifying 

the beneficiaries. As another example, 

assume a see-through trust is designated 

as a beneficiary of the employee’s 

interest in the plan and that trust could 

be liable for expenses of administering 

and distributing the deceased 

employee’s estate at death. In this case, 

the decedent’s estate is treated as a 

beneficiary of the employee designated 

under the plan because some portion of 

the employee’s interest in the plan may 

be used for the payment of those 

administration expenses, thus satisfying 

an obligation of the estate. However, if 

all of those expenses that could be paid 

from the employee’s interest in the plan 

are paid by September 30 of the 

calendar year following the calendar 

year in which the employee died (so 

that by that date, the deceased 

employee’s estate received the entire 

interest to which it was entitled), then 

the deceased employee’s estate is 

disregarded, and the other beneficiaries 

of the see-through trust are considered 

beneficiaries of the employee. 

E. Section 1.401(a)(9)–5—Required 

Minimum Distributions From Defined 

Contribution Plans 

1. In General 

Proposed § 1.401(a)(9)–5 retains the 

general method in the existing 

regulations by which a required 

minimum distribution from a defined 

contribution plan is calculated in any 

calendar year when an employee dies 

on or after the required beginning date 

or when an employee’s eligible 

designated beneficiary is taking life 

expectancy payments after an employee 

dies before the required beginning date. 

Specifically, the required minimum 

distribution for a calendar year is 

determined by dividing the employee’s 

account balance as of the end of the 

prior year by an applicable divisor. The 

existing regulations refer to the divisor 

as the applicable distribution period. 

However, in light of the amendments 

made by section 401 of the SECURE Act 

that may result in different distribution 

periods, these proposed regulations 

refer to the divisor as the applicable 

denominator. In addition to the 

requirement to take annual required 

minimum distributions, the proposed 

regulations implement those 

amendments by requiring that a full 

distribution of the remaining interest be 

taken in certain circumstances. 

These proposed regulations also 

update the list of amounts of 

distributions and deemed distributions 

that are not taken into account in 

determining whether the required 

minimum distribution has been made 

for a calendar year. Under the proposed 

regulations, that list is implemented by 

a cross-reference to a list of amounts in 

§ 1.402(c)–2(c)(3) (relating to amounts 

that are not treated as eligible rollover 

distributions). The effect of the new 

cross-reference is to add the following 

items to the list of amounts that are 

disregarded for purposes of determining 

the required minimum distribution from 

a defined contribution plan: Prohibited 

allocations that are treated as deemed 

distributions pursuant to section 409(p), 

distributions of premiums for health 

and accident insurance, deemed 

distributions with respect to a 

collectible pursuant to section 408(m), 

and distributions that are permissible 

withdrawals from an eligible automatic 

contribution arrangement within the 

meaning of section 414(w). 

2. Distributions While the Employee Is 

Alive 

These proposed regulations provide 

that, in determining the required 

minimum distribution for a distribution 

calendar year beginning while the 

employee is alive, the employee divides 

the account balance as of December 31 

of the preceding calendar year by the 

employee’s applicable denominator. 

Generally, the applicable denominator 

is determined using the Uniform 

Lifetime Table in § 1.401(a)(9)–9(c). 

However, if the employee’s sole 

beneficiary is the employee’s spouse 

who is more than 10 years younger than 

the employee, then the applicable 

denominator is determined using the 

Joint and Last Survivor Table in 

§ 1.401(a)(9)–9(d) (providing for a longer 

payout period). 

3. Distributions After the Employee’s 

Death 

a. Requirement To Satisfy Both Section 

401(a)(9)(B)(i) and (ii) in the Case of an 

Employee Who Dies on or After the 

Required Beginning Date 

Section 401(a)(9)(B)(i) provides rules 

that apply if an employee dies after 

benefits have commenced. While the 5- 

year rule under section 401(a)(9)(B)(ii) 


jspears on DSK121TN23PROD with PROPOSALS3
10514 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

(expanded to a 10-year rule in certain 

cases by section 401(a)(9)(H)(i)(I)) 

generally applies if an employee dies 

before the employee’s required 

beginning date, section 

401(a)(9)(H)(i)(II) provides that section 

401(a)(9)(B)(ii) applies whether or not 

distributions have commenced. 

Accordingly, if an employee dies after 

the required beginning date, 

distributions to the employee’s 

beneficiary for calendar years after the 

calendar year in which the employee 

died must satisfy section 401(a)(9)(B)(i) 

as well as section 401(a)(9)(B)(ii). In 

order to satisfy both of these 

requirements, these proposed 

regulations provide for the same 

calculation of the annual required 

minimum distribution that was adopted 

in the existing regulations but with an 

additional requirement that a full 

distribution of the employee’s entire 

interest in the plan be made upon the 

occurrence of certain designated events 

(discussed in section I.E.3.c. of this 

Explanation of Provisions). 

b. Determination of Applicable 

Denominator 

If an employee died on or after the 

required beginning date (or the 

employee died before the required 

beginning date and the employee’s 

eligible designated beneficiary is taking 

life expectancy distributions in 

accordance with section 401(a)(9)(B)(iii) 

and these proposed regulations), then 

for calendar years after the calendar year 

in which the employee died, the 

applicable denominator generally is the 

remaining life expectancy of the 

designated beneficiary. The 

beneficiary’s remaining life expectancy 

generally is calculated using the age of 

the beneficiary in the year following the 

calendar year of the employee’s death, 

reduced by one for each subsequent 

calendar year. 

However, as an exception to these 

general rules, if the employee’s spouse 

is the employee’s sole beneficiary, then 

the applicable denominator during the 

spouse’s lifetime is the spouse’s life 

expectancy (which reflects a 

recalculation in accordance with section 

401(a)(9)(D)). In this case, for calendar 

years after the calendar year in which 

the spouse died, in determining the 

required minimum distribution to the 

spouse’s beneficiary, the applicable 

denominator is the spouse’s life 

expectancy calculated in the calendar 

year in which the spouse died, reduced 

by one for each subsequent calendar 

year. 

If the employee has no designated 

beneficiary, then the applicable 

denominator is the employee’s life 

expectancy calculated in the calendar 

year in which the employee died, 

reduced by one for each subsequent 

calendar year. This applicable 

denominator is also used in the case of 

an employee who died after the required 

beginning date and who was younger 

than the designated beneficiary. 

c. Full Distribution Required in Certain 

Circumstances 

In order to satisfy the 5-year rule of 

section 401(a)(9)(B)(ii) (or, if applicable, 

the exception to that rule in section 

401(a)(9)(B)(iii), taking into account 

section 401(a)(9)(H), and (E)(iii)), these 

proposed regulations provide that, if an 

employee’s interest is in a defined 

contribution plan to which section 

401(a)(9)(H) applies, then the 

employee’s entire interest in the plan 

must be distributed by the earliest of the 

following dates: 

(1) The end of the tenth calendar year 

following the calendar year in which the 

employee died if the employee’s 

designated beneficiary is not an eligible 

designated beneficiary; 

(2) The end of the tenth calendar year 

following the calendar year in which the 

designated beneficiary died if the 

employee’s designated beneficiary was 

an eligible designated beneficiary; 

(3) The end of the tenth calendar year 

following the calendar year in which the 

beneficiary reaches the age of majority 

if the employee’s designated beneficiary 

is the child of the employee who has not 

yet reached the age of majority as of the 

date of the employee’s death; and 

(4) The end of the calendar year in 

which the applicable denominator 

would have been less than or equal to 

one if it were determined using the 

beneficiary’s remaining life expectancy, 

if the employee’s designated beneficiary 

is an eligible designated beneficiary, 

and if the applicable denominator is 

determined using the employee’s 

remaining life expectancy. 

For example, if an employee died 

after the required beginning date with a 

designated beneficiary who is not an 

eligible designated beneficiary, then the 

designated beneficiary would continue 

to have required minimum distributions 

calculated using the beneficiary’s life 

expectancy as under the existing 

regulations for up to nine calendar years 

after the employee’s death. In the tenth 

year following the calendar year of the 

employee’s death, a full distribution of 

the employee’s remaining interest 

would be required. 

Similarly, if an employee died after 

the required beginning date with an 

eligible designated beneficiary, then the 

eligible designated beneficiary would 

continue to have required minimum 

distributions calculated during the 

beneficiary’s lifetime using the rules 

under the existing regulations. However, 

if the eligible designated beneficiary 

dies before the entire interest of the 

employee is distributed, then the 

beneficiary of that eligible designated 

beneficiary would continue taking 

annual distributions using the rules 

under the existing regulations for up to 

nine years after the death of the eligible 

designated beneficiary. In the tenth year 

following the calendar year of the 

eligible designated beneficiary’s death, a 

full distribution of the employee’s 

remaining interest would be required. 

If the employee’s designated 

beneficiary is a child of the employee 

who, as of the employee’s death, has not 

yet reached the age of majority, then the 

child would have annual required 

minimum distributions calculated 

during the child’s lifetime using the 

rules of the existing regulations. 

However, those distributions would be 

permitted to be paid for up to only nine 

years after the child reaches the age of 

majority with a full distribution of the 

employee’s remaining interest required 

in the tenth year following the calendar 

year in which the child reaches the age 

of majority. 

As another example, if an employee 

died at age 75 after the required 

beginning date and the employee’s nonspouse eligible designated beneficiary 

was age 80 at the time of the employee’s 

death, the applicable denominator 

would be determined using the 

employee’s remaining life expectancy. 

However, these proposed regulations 

require a full distribution of the 

employee’s remaining interest in the 

plan in the calendar year in which the 

applicable denominator would have 

been less than or equal to one if it were 

determined using the beneficiary’s 

remaining life expectancy (even though 

the applicable denominator for 

determining the required minimum 

distribution is based on the remaining 

life expectancy of the employee). In this 

case, based on the beneficiary’s life 

expectancy of 11.2 in the year of the 

employee’s death, a full distribution 

would be required in the year the 

beneficiary reaches age 91 (because in 

the 11th calendar year after the 

employee’s death the beneficiary’s life 

expectancy would be less than or equal 

to one). 

d. Multiple Designated Beneficiaries 

These proposed regulations include a 

modified version of the general rule 

adopted in the existing regulations that 

applies if an employee has more than 

one designated beneficiary. Specifically, 

instead of determining the applicable 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10515 

denominator using the beneficiary with 

the shortest life expectancy, these 

proposed regulations provide that the 

applicable denominator is determined 

using the life expectancy of the oldest 

designated beneficiary. The proposed 

regulations provide that whether a full 

distribution is required also generally is 

determined using the oldest of the 

designated beneficiaries. For example, if 

an employee has multiple eligible 

designated beneficiaries who are born in 

the same calendar year, then full 

distribution of the employee’s 

remaining interest generally is required 

by the tenth calendar year following the 

death of the oldest designated 

beneficiary. 

These general rules for multiple 

designated beneficiaries are subject to 

certain exceptions. Under one 

exception, if the employee’s beneficiary 

is a type II applicable multi-beneficiary 

trust, then only the disabled and 

chronically ill beneficiaries of the trust 

are taken into account in determining 

the oldest designated beneficiary. Thus, 

the ages of the other beneficiaries are 

disregarded in determining the 

applicable denominator, and the death 

of the last of the disabled or chronically 

ill trust beneficiaries triggers the 10-year 

payout requirement under section 

401(a)(9)(H)(iii). 

Under a second exception to the 

general rule, if any of the employee’s 

designated beneficiaries is a child of the 

employee who has not yet reached the 

age of majority as of the date of the 

employee’s death, then, in applying the 

requirement to make a full distribution 

by the tenth year following the death of 

the oldest eligible designated 

beneficiary, only the employee’s 

children who are designated 

beneficiaries and who are under the age 

of majority at the employee’s date of 

death are taken into account. Thus, in 

a situation involving one or more 

designated beneficiary children under 

the age of majority and one or more 

older designated beneficiaries, the death 

of an older designated beneficiary will 

not result in a requirement to pay a full 

distribution before the oldest child 

attains the age of majority plus ten 

years. In this case, a full distribution of 

the employee’s remaining interest is not 

required until the tenth calendar year 

following the calendar year in which the 

oldest child of the employee who is a 

designated beneficiary and who had not 

attained the age of majority as of the 

employee’s death reaches the age of 

majority (or, if earlier, the tenth 

calendar year following the calendar 

year of that child’s death). 

To illustrate these rules, assume an 

employee died at the age of 75 after the 

employee’s required beginning date, and 

the employee named a see-through trust 

that is an accumulation trust as the 

employee’s beneficiary under the plan. 

The terms of the trust require specified 

amounts to be paid to the employee’s 

surviving spouse (who was age 74 at the 

time of the employee’s death). Upon the 

spouse’s death, the trust will terminate 

and the amounts remaining in the trust 

that have not been paid to the spouse 

will be paid to the employee’s sibling 

(who was age 67 at the time of the 

employee’s death). If the employee’s 

sibling predeceases the surviving 

spouse, the amounts remaining in the 

trust that have not been paid to the 

surviving spouse will be paid to a 

charity. In this case, the charity is 

disregarded as a beneficiary of the 

employee (as described in Section 

I.D.2.a.2 of this Explanation of 

Provisions), and all of the other trust 

beneficiaries are eligible designated 

beneficiaries (a surviving spouse and a 

beneficiary who is not more than 10 

years younger than the employee). 

Under these proposed regulations, 

required minimum distributions are 

made to the trust beginning in the 

calendar year after the calendar year of 

the employee’s death using the 

surviving spouse’s remaining life 

expectancy, because the surviving 

spouse is the oldest beneficiary of the 

employee. Upon the surviving spouse’s 

death, annual distributions must 

continue to the trust using the surviving 

spouse’s remaining life expectancy in 

the calendar year of the spouse’s death, 

reduced by one in each subsequent 

calendar year. In addition, the entire 

interest of the employee must be 

distributed no later than the tenth 

calendar year following the calendar 

year of the spouse’s death. 

F. Section 1.401(a)(9)–6—Required 

Minimum Distributions From Defined 

Benefit Plans 

Proposed § 1.401(a)(9)–6 provides 

rules for required minimum 

distributions from defined benefit plans 

and from annuity contracts that are 

annuitized to pay benefits under 

defined contribution plans. These rules 

are based on the existing regulations 

and are updated to reflect the 

amendments to section 401(a)(9) of the 

Code made by section 114 of the 

SECURE Act regarding the required 

beginning date and actuarial increases. 

1. Rules Applicable to Defined Benefit 

Plans 

a. Actuarial Increase for Employees 

Retiring After Age 701⁄2

These proposed regulations address 

the actuarial increase required under 

section 401(a)(9)(C)(iii). Section 

401(a)(9)(C)(iii) provides that, if section 

401(a)(9)(C)(i)(II) applies to an employee 

and the employee retires in a calendar 

year after the calendar year in which the 

employee attains age 701⁄2, then the 

employee’s accrued benefit must be 

actuarially increased to take into 

account the period after age 701⁄2 during 

which the employee was not receiving 

any benefits under the plan. Section 

401(a)(9)(C)(ii)(I) provides that section 

401(a)(9)(C)(i)(II) (providing a required 

beginning date based on the calendar 

year in which the employee retires) does 

not apply to an employee who is a 5- 

percent owner (as defined in section 

416) for the plan year ending in the 

calendar year in which the employee 

attains age 72. 

The proposed regulations reflect that 

the required actuarial increase under 

section 401(a)(9)(C)(iii) does not apply 

to a 5-percent owner. This is because 

the actuarial increase is limited to 

employees to whom section 

401(a)(9)(C)(i)(II) applies (and section 

401(a)(9)(C)(ii)(I) provides that section 

401(a)(9)(C)(i)(II) generally does not 

apply in the case of an employee who 

is a 5-percent owner). Thus, the 

required actuarial increase applies to an 

employee other than a 5-percent owner 

who retires in a calendar year after the 

calendar year in which the employee 

attains age 701⁄2. 

These proposed regulations, like the 

existing regulations, reflect the 

exception from the requirements of 

section 401(a)(9)(C)(iii) provided under 

section 401(a)(9)(C)(iv) for governmental 

plans and church plans. Section 

401(a)(9)(C)(iv) specifies that for 

purposes of section 401(a)(9), a church 

plan is a plan maintained by a church 

for church employees, and a church is 

any church within the meaning of 

section 3121(w)(3)(A) or any qualified 

church-controlled organization within 

the meaning of section 3121(w)(3)(B). 

These proposed regulations clarify that 

the determination of whether an 

employee is a church employee is made 

without regard to whether the employee 

would be considered an employee of a 

church under section 414(e)(3)(B). 

Therefore, a plan for the employees of 

a tax-exempt organization that is not a 

church or a qualified church-controlled 

organization must provide an actuarial 

increase for an employee who retires in 

a calendar year after the calendar year 


jspears on DSK121TN23PROD with PROPOSALS3
10516 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

7Notice 2014–66 provides relief under section 

401(a)(4) to enable plans to provide lifetime income 

by offering, as investment options, a series of target 

date funds that include deferred annuities among 

their assets, even if some of the target date funds 

within the series are available only to older 

participants. 

in which the employee reaches age 

701⁄2. 

b. Interaction of Benefit Restrictions 

Under Section 436(d) and Minimum 

Distribution Requirements Under 

Section 401(a)(9) 

Under section 436(d), a plan is 

required to provide certain limitations 

on accelerated benefit distributions. 

Under section 436(d)(1), if the plan’s 

annual funding target attainment 

percentage (AFTAP) for a plan year is 

less than 60 percent, the plan must not 

make any prohibited payment (that is, a 

payment in excess of the monthly 

amount paid under a single life annuity 

or a payment for the purchase of an 

irrevocable commitment from an insurer 

to pay benefits) after the valuation date 

for the plan year. Under section 

436(d)(2), if the plan sponsor is in 

bankruptcy proceedings, the plan may 

not pay any prohibited payment unless 

the plan’s enrolled actuary certifies that 

the AFTAP of the plan is at least 100 

percent. Under section 436(d)(3), if the 

plan’s AFTAP for a plan year is at least 

60 percent but is less than 80 percent, 

the plan must not pay any prohibited 

payment to the extent the payment 

exceeds the lesser of (1) 50 percent of 

the amount otherwise payable under the 

plan, and (2) the present value of the 

maximum Pension Benefit Guaranty 

Corporation guarantee with respect to a 

participant. 

If an employee dies before the 

required beginning date and 

distributions are being made in 

accordance with section 401(a)(9)(B)(ii), 

then the entire interest of the employee 

generally must be distributed within 5 

years of the employee’s death (the 5- 

year rule). Because compliance with this 

requirement under section 

401(a)(9)(B)(ii) may conflict with the 

requirements of section 436(d), these 

proposed regulations provide an 

exception to the 5-year rule so that a 

plan will not fail to comply with those 

requirements merely because payments 

by the plan are restricted by section 

436(d). Under this provision, benefits 

that are required to be paid under the 

5-year rule may extend past the section 

401(a)(9)(B)(ii) deadline for full 

payment provided that the payments (1) 

start by the fifth year after the 

employee’s death, and (2) are paid in a 

form that is as accelerated as permitted 

under section 436(d). 

2. Rules Applicable to Annuity 

Contracts 

a. Annuity Providers Must Be Licensed 

Like the existing regulations, these 

proposed regulations provide that, for 

either a defined benefit plan or a 

defined contribution plan, the required 

minimum distribution rules may be 

satisfied through the purchase, with the 

employee’s entire interest in the plan, of 

an annuity contract that provides 

periodic annuity payments for the 

employee’s life (or the joint lives of the 

employee and beneficiary) or over a 

period certain. These proposed 

regulations add a rule that, for this 

purpose, the annuity contract must be 

issued by an insurance company 

licensed in the jurisdiction where the 

annuity is sold. However, pursuant to 

§ 1.403(b)–6(e)(5), this rule does not 

apply to an annuity paid under a 

retirement income account that is 

described in section 403(b)(9). 

b. Qualified Longevity Annuity 

Contracts 

In 2014, the Treasury Department and 

the IRS amended the regulations under 

section 401(a)(9) in order to facilitate 

the purchase, under a defined 

contribution plan, of a deferred annuity 

that commences annuity payments at an 

advanced age. See 79 FR 37633. Those 

modifications apply to an annuity 

contract that satisfies certain 

requirements, including a requirement 

that distributions commence not later 

than age 85. Prior to annuitization, the 

value of this type of contract, referred to 

as a Qualified Longevity Annuity 

Contract (QLAC), is excluded from the 

account balance used to determine 

required minimum distributions. 

Section 1.401(a)(9)–6, A–17(a)(4), of 

the existing regulations provides that a 

QLAC may not make available any 

commutation benefit, cash surrender 

value, or other similar feature. These 

proposed regulations would change this 

rule so that this prohibition applies only 

after the required beginning date. This 

change is proposed so that if a plan’s 

investment options include a series of 

target date funds to which the relief 

under Notice 2014–66, 2014–46 I.R.B. 

820 applies,7 those target date funds 

would be permitted to include QLACs 

among their assets. 

3. Other Rules 

a. Increasing Payments 

Like the existing regulations, these 

proposed regulations generally provide 

that all payments under a defined 

benefit plan or annuity contract must be 

nonincreasing, subject to a number of 

exceptions. These proposed regulations 

retain the exceptions in the existing 

final regulations and add to the list of 

circumstances under which annuity 

payments under a defined benefit plan 

may increase. Under the proposed 

regulations, annuity payments may 

increase as a result of the resumption of 

benefits that were suspended pursuant 

to section 411(a)(3)(B) (for a retiree 

whose benefits were suspended on 

account of employment after 

commencement of benefits and then 

resume after the suspension of benefits 

ends). In addition, annuity payments 

may increase as a result of the 

resumption of benefits that were 

suspended pursuant to section 418E (for 

an insolvent plan) or section 432(e)(9) 

(for a participant or beneficiary of a plan 

in critical and declining status whose 

benefits have been suspended under 

section 432(e)(9), if the suspension of 

benefits consists of a temporary 

reduction of benefits or if suspended 

benefits resume because of a failure to 

meet the conditions of section 

432(e)(9)(C)). 

The existing regulations provide a 

number of exceptions under which 

payments from annuity contracts 

purchased from insurance companies 

may increase, and certain of these 

exceptions apply only if the total future 

expected payments under the contract 

exceed the total value being annuitized. 

These proposed regulations make a 

minor modification to the rules to 

clarify the calculation of the total future 

expected payments and the total value 

being annuitized. Specifically, these 

proposed regulations modify the 

determination of the total value being 

annuitized by providing that the total 

value is calculated as of the date on 

which the contract is annuitized. This 

modification (under which this 

determination is made as of the date on 

which the contract is annuitized, rather 

than the date on which payments on the 

annuitized contract begin as specified in 

§ 1.401(a)(9)–6, A–14(e)(1)(i) of the 

existing regulations), will have an effect 

only in situations in which the contract 

is annuitized on a date earlier than the 

date on which payments begin. In 

addition, these proposed regulations 

update the examples illustrating these 

rules to reflect the mortality rates in 

§ 1.401(a)(9)–9. 

These proposed regulations also 

provide three additional exceptions to 

the nonincreasing payments 

requirement for annuities issued by 

insurance companies that apply without 

regard to a comparison of the total 

future expected payments and the total 

value being annuitized. Two of these 

exceptions have been added because 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10517 

commentors have identified that certain 

policy features are popular with 

policyholders and these features do not 

have a material impact on the amount 

of expected payments. First, these 

proposed regulations allow an annuity 

contract to provide a final payment 

upon the death of the employee that 

does not exceed the excess of total value 

being annuitized over the total of 

payments before the death of the 

employee. Second, these proposed 

regulations allow an annuity contract to 

offer a short-term acceleration of 

payments, under which up to one year 

of annuity payments are paid in 

advance of when those payments were 

scheduled to be made. In addition, to 

facilitate compliance, these proposed 

regulations provide a third exception 

that allows an annuity contract to 

provide an acceleration of payments 

that is required to comply with section 

401(a)(9)(H). 

b. Payments to Children 

These proposed regulations amend 

the existing rules governing when, 

pursuant to section 401(a)(9)(F), 

payment of an employee’s accrued 

benefit to a child may be treated as if the 

payments were made to a surviving 

spouse. These rules are the same as 

under the existing regulations except, as 

discussed in Section I.D.1.a of this 

Explanation of Provisions, these 

proposed regulations specify that an 

individual reaches the age of majority 

for purposes of sections 

401(a)(9)(E)(ii)(II) and (F) on that 

individual’s 21st birthday. 

Under these proposed regulations, a 

plan’s terms that define the age of 

majority that were adopted on or before 

February 24, 2022 and met the 

requirements of § 1.401(a)(9)–6, A–15 of 

the existing regulations are not required 

to be amended to reflect this change, 

and the plan may continue to use that 

plan definition of the age of majority for 

purposes of section 401(a)(9)(F). 

Moreover, because a governmental plan 

is subject only to a reasonable, good 

faith standard in complying with the 

rules of section 401(a)(9), the plan terms 

of a governmental plan may use a 

definition of the age of majority for 

purposes of section 401(a)(9)(F) that 

meets the requirements of § 1.401(a)(9)– 

6, A–15 of the existing regulations, even 

if the plan terms that define age of 

majority are adopted after that date. 

G. Section 1.401(a)(9)–7—Rollovers and 

Transfers 

Proposed § 1.401(a)(9)–7 retains the 

rollover and transfer rules that are in the 

existing regulations. 

H. Section 1.401(a)(9)–8—Special Rules 

Proposed § 1.401(a)(9)–8 provides 

special rules applicable to satisfying the 

minimum distribution requirement. 

These include separate account 

treatment for beneficiaries, the 

definition of spouse (updated to include 

the post-Obergefell regulations under 

§ 301.7701–18), application of the 

qualified domestic relations order 

(QDRO) rules, and the applicability of 

elections under section 242(b)(2) of the 

Tax Equity and Fiscal Responsibility 

Act of 1982, Public Law 97–248, 96 Stat. 

324 (1982) (TEFRA). 

The proposed regulation generally 

retains the separate account rules 

applicable to beneficiaries after the 

death of the employee that were 

adopted in the existing regulations, 

including the rule that prohibits 

separate application of section 401(a)(9) 

to separate interests in a trust. However, 

in light of the new applicable multibeneficiary trust rules provided in 

section 401(a)(9)(H)(iv), these proposed 

regulations provide an exception to that 

prohibition that would permit separate 

application of section 401(a)(9) to the 

separate subtrusts of a type I applicable 

multi-beneficiary trust. 

These proposed regulations also 

clarify the rules under which section 

401(a)(9) is applied separately with 

respect to the separate interests of each 

of the employee’s beneficiaries under a 

plan, provided that the separate 

accounting requirements are satisfied. 

Those separate accounting requirements 

include: 

(1) Any post-death distribution with 

respect to a beneficiary’s interest must 

be allocated to the separate account of 

that beneficiary; 

(2) All post-death investment gains 

and losses, contributions, and 

forfeitures, for the period prior to the 

establishment of the separate accounts 

must be allocated on a pro rata basis in 

a reasonable and consistent manner 

among the separate accounts; and 

(3) The investment return with 

respect to the investments held in the 

separate accounts that were established 

for the separate interests of the 

beneficiaries must be allocated to those 

separate accounts. 

However, if the separate accounting 

requirements are not satisfied until after 

the end of the calendar year following 

the calendar year of the employee’s 

death, then, for calendar years after the 

separate accounting requirements are 

satisfied: (1) The required minimum 

distribution is determined without 

regard to the separate accounts; (2) the 

aggregate distribution is allocated 

among the beneficiaries based on each 

beneficiary’s share of the total 

remaining balance of the employee’s 

interest; and (3) the allocated share for 

each beneficiary must be distributed to 

each respective beneficiary. 

I. Section 1.401(a)(9)–9—Life 

Expectancy and Distribution Period 

Tables 

These proposed regulations include 

minor changes to existing provisions of 

§ 1.401(a)(9)–9 to conform the 

terminology in that section to the new 

terminology used in proposed 

§ 1.401(a)(9)–5. For example, references 

to the ‘‘applicable distribution period’’ 

have been changed to refer to the 

‘‘applicable denominator.’’ 

II. Section 402(c) Regulations 

These proposed regulations provide 

updates to existing rules of § 1.402(c)– 

2 that reflect statutory amendments 

made to section 402(c) since the 

regulations were issued in 1995. Those 

amendments are described in the 

Background section of this Preamble 

under the heading ‘‘Section 402(c)— 

Rollovers.’’ 

A. Exclusion From Income of Amount 

Rolled Over 

These proposed regulations provide 

that, if an employee receives an eligible 

rollover distribution and rolls it over to 

any eligible retirement plan within 60 

days of the distribution (including any 

amount withheld under section 

3405(c)), then the distribution generally 

is not includible in gross income. 

However, if any portion of the eligible 

rollover distribution is rolled over to a 

Roth IRA and the distribution is not 

from a designated Roth account, that 

portion is includible in the taxpayer’s 

gross income but generally is not subject 

to the 10-percent additional tax under 

section 72(t). 

B. Definition of Eligible Rollover 

Distribution and Eligible Retirement 

Plan 

These proposed regulations update 

the definition of eligible rollover 

distribution to include the portion of the 

distribution that constitutes the 

employee’s investment in the contract 

and provide that, pursuant to section 

402(c)(4)(C), an eligible rollover 

distribution does not include any 

distribution made on account of 

hardship. These proposed regulations 

also provide that a rollover distribution 

may be a 60-day rollover, a direct 

rollover described in section 401(a)(31), 

or the repayment of a distribution that 

is treated as a rollover pursuant to 

another statutory provision (such as the 

repayment of a qualified birth or 


jspears on DSK121TN23PROD with PROPOSALS3
10518 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

adoption distribution that is treated as 

a rollover pursuant to section 

72(t)(2)(H)(v)(III)). 

These proposed regulations also 

update the list of amounts of 

distributions and deemed distributions 

that are not eligible rollover 

distributions. Specifically, the proposed 

regulation adds that a deemed 

distribution with respect to a collectible 

pursuant to section 408(m) is not treated 

as an eligible rollover distribution. 

These proposed regulations provide 

that, pursuant to section 402(c)(8)(B), an 

eligible retirement plan is: (1) An IRA; 

(2) a qualified plan (including an 

employee’s trust described in section 

401(a) that is exempt from taxation 

under section 501(a), an annuity plan 

under section 403(a) or an annuity 

contract under 403(b)); or (3) an eligible 

deferred compensation plan under 

section 457(b) maintained by an 

employer described in section 

457(e)(1)(A) (such as a State or local 

government). Pursuant to section 

402(c)(10), an eligible deferred 

compensation plan under section 457(b) 

is an eligible retirement plan only if it 

separately accounts for amounts rolled 

into the plan. Furthermore, an eligible 

rollover distribution from a designated 

Roth account under section 402A may 

be rolled over only to another 

designated Roth account or to a Roth 

IRA. 

C. Special Rules Related to Eligible 

Rollover Distributions 

1. Distributions That Include Basis 

In accordance with section 402(c)(2), 

these proposed regulations provide that 

if an eligible rollover distribution 

includes an amount that is allocable to 

the employee’s basis (that is, the 

employee’s investment in the contract), 

then additional rules will apply if it is 

not rolled over to an IRA. Specifically, 

if the rollover is to a qualified plan or 

annuity contract described in section 

403(b), then the rollover must be made 

through a direct trustee-to-trustee 

transfer. In addition, the portion of a 

distribution that is allocable to an 

employee’s basis may not be rolled over 

to an eligible deferred compensation 

plan described in section 457(b). 

These proposed regulations also 

provide that if an eligible rollover 

distribution includes an amount that is 

allocable to an employee’s basis, and 

only a portion of that distribution is 

rolled over, then the portion that is 

rolled over is treated as first consisting 

of the portion of the distribution that is 

not allocable to the employee’s basis. 

2. Distributions That Include Property 

These proposed regulations reflect the 

rules in section 402(c)(1)(C) and provide 

that, generally, if an eligible rollover 

distribution is made in the form of 

property, then that property may be 

rolled over. In accordance with section 

402(c)(6)(A), if that property is sold after 

being distributed, then the proceeds of 

the sale may be rolled over (up to the 

fair market value of the property at the 

time of the sale), but only if the 

distribution otherwise satisfies the 

requirements to be an eligible rollover 

distribution. The Treasury Department 

and the IRS request comments on 

whether there are additional issues 

under section 402(c)(6) concerning the 

treatment of the proceeds of the sale of 

the property (including in situations in 

which the proceeds of the sale exceed 

the fair market value of the property at 

the time of the distribution) that should 

be addressed in future guidance. 

3. Extensions of and Exceptions to the 

60-Day Rollover Deadline 

These proposed regulations provide 

for certain extensions of and exceptions 

to the 60-day deadline by which an 

eligible rollover distribution must be 

rolled over to an eligible retirement 

plan. Specifically, the regulations adopt 

the requirements of section 402(c)(3)(B), 

which provides that the Commissioner 

may waive the 60-day deadline if the 

failure to waive that requirement would 

be against equity or good conscience, 

including casualty, disaster, or other 

events beyond the reasonable control of 

the individual with respect to that 

requirement. In addition, the proposed 

regulations provide that the 60-day 

period does not include any period 

during which the amount transferred to 

the employee is a frozen deposit 

described in section 402(c)(7)(B), and 

does not end earlier than 10 days after 

that amount ceases to be a frozen 

deposit. The proposed regulations also 

clarify that in the case of a repayment 

of a distribution treated as a rollover 

(such as a qualified disaster 

distribution), the repayment timing 

requirements in the statutory provision 

giving rise to that treatment take 

precedence over the otherwise 

applicable 60-day period. Finally, these 

proposed regulations also move the 

rules for the section 402(c)(3)(C) 

exception to the 60-day deadline for a 

rollover of a QPLO amount from 

§ 1.402(c)–3 to § 1.402(c)–2(g). 

D. Distributions to Beneficiaries 

1. General Rules 

These proposed regulations provide 

that, generally, a distributee other than 

the employee or the employee’s 

surviving spouse is not permitted to roll 

over a distribution from a qualified 

plan. Pursuant to section 402(c)(9), 

these proposed regulations provide that 

a surviving spouse may roll over an 

employee’s interest in the plan to an 

IRA or a qualified plan. In the case of 

a spousal rollover to a qualified plan, 

the amount rolled over is treated as the 

spouse’s own interest in the receiving 

plan and not as the decedent’s interest 

in the distributing plan. Accordingly, 

with respect to the amount rolled over 

to a qualified plan, section 401(a)(9) is 

satisfied under the rules of section 

401(a)(9)(A) (applicable to distributions 

to employees) and not section 

401(a)(9)(B) (applicable to distributions 

to beneficiaries following the 

employee’s death). 

These proposed regulations provide 

that a designated beneficiary who is not 

a spouse may elect, under section 

402(c)(11), to have any portion of a 

distribution that fits within the 

definition of an eligible rollover 

distribution transferred via a direct 

trustee-to-trustee transfer to an IRA 

established for the purpose of receiving 

that distribution. If that transfer is made 

pursuant to section 402(c)(11), the 

distribution is treated as an eligible 

rollover distribution; the IRA is treated 

as an inherited account or annuity (as 

defined in section 408(d)(3)(C), so that 

distributions from the inherited IRA are 

not eligible to be rolled over); and the 

IRA is subject to section 401(a)(9)(B) 

(other than section 401(a)(9)(B)(iv)). 

In determining whether a distribution 

to a beneficiary is an eligible rollover 

distribution, the portion of the 

distribution that constitutes a required 

minimum distribution under section 

401(a)(9) must be determined. The 

proposed regulations set forth rules for 

making this determination that are 

similar to the rules adopted in Notice 

2007–7, Q&A–17 and Q&A–19, but are 

expanded to apply to both spouse and 

non-spouse beneficiaries. 

These proposed regulations provide 

that, generally, if an employee dies 

before the required beginning date, then 

the amount of a distribution to a 

beneficiary that is treated as a required 

minimum distribution under section 

401(a)(9) (and thus is not an eligible 

rollover distribution) is determined 

based on whether the 5-year rule, 10- 

year rule, or life expectancy rule (or, in 

the case of a defined benefit plan, the 

annuity payment rule) applies. 

Regardless of which rule applies, no 

portion of a distribution made in the 

year of the employee’s death is treated 

as a required minimum distribution 

under section 401(a)(9). 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10519 

If the 5-year rule applies, then no 

amount distributed before the fifth 

calendar year after the calendar year of 

the employee’s death is treated as a 

required minimum distribution. In the 

fifth calendar year after the calendar 

year of the employee’s death, the entire 

amount distributed in that year is 

treated as a required minimum 

distribution (and thus is not an eligible 

rollover distribution). Similarly, if the 

10-year rule applies, then, generally, no 

amount distributed before the tenth 

calendar year after the calendar year of 

the employee’s death is treated as a 

required minimum distribution. In the 

tenth calendar year after the calendar 

year of the employee’s death, the entire 

amount distributed in that year is 

treated as a required minimum 

distribution (and thus is not an eligible 

rollover distribution). 

If the employee dies on or after the 

required beginning date or if the life 

expectancy rule applies (or, in the case 

of a defined benefit plan, the annuity 

payment rule applies), then, in the first 

distribution calendar year for the 

beneficiary and for each subsequent 

year, the amount treated as a required 

minimum distribution (and thus is not 

an eligible rollover distribution) is 

determined in accordance with the rules 

described in Sections I.F and I.G of this 

Explanation of Provisions. In this 

situation, if the employee dies before 

receiving the distribution, the amount 

that would have otherwise been a 

required minimum distribution for the 

employee in the calendar year of the 

employee’s death is treated as a required 

minimum distribution with respect to 

any distribution to a beneficiary of the 

employee. A similar rule applies if the 

employee’s beneficiary dies before 

receiving the distribution for the 

calendar year of the beneficiary’s death, 

so that the amount that would have 

otherwise been a required minimum 

distribution for the employee’s 

beneficiary in the calendar year of that 

beneficiary’s death is treated as a 

required minimum distribution with 

respect to any distribution to a 

beneficiary of the employee’s 

beneficiary. 

These proposed regulations provide 

an exception for a beneficiary to whom 

the 5-year rule or 10-year rule applies if 

that beneficiary makes the election 

described in Section IV of this 

Explanation of Provisions to have the 

life expectancy rule (or annuity 

payment rule) apply to amounts in the 

IRA that receives the distribution (rather 

than the 5-year rule or 10-year rule that 

applied under the distributing plan). 

This exception ensures that if a 

beneficiary makes that election, then the 

portion of a distribution from the plan 

that is a required minimum distribution 

is determined in a consistent manner 

with respect to all amounts to which the 

life expectancy rule or annuity payment 

rule apply. 

2. Special Rule for Certain Distributions 

to Surviving Spouses 

These proposed regulations also 

provide for a special rule that limits the 

ability of a surviving spouse to use the 

5-year rule or the 10-year rule to defer 

distributions beyond the otherwise 

required beginning date and then, after 

that date, commence annual 

distributions. This rule, which applies 

in limited circumstances, is used to 

determine, with respect to a distribution 

to the employee’s surviving spouse to 

whom the 5-year rule or 10-year rule 

applies, the portion of that distribution 

that is treated as a required minimum 

distribution under section 401(a)(9) (and 

thus is not an eligible rollover 

distribution). This special rule, which 

treats a portion of a distribution made 

before the last year of the 5-year or 10- 

year period (whichever applies to the 

spouse) as a required minimum 

distribution, applies if: (1) The 

distribution is made in or after the 

calendar year the surviving spouse 

attains age 72; and (2) the surviving 

spouse rolls over some or all of the 

distribution to an eligible retirement 

plan under which the surviving spouse 

is not treated as the beneficiary of the 

employee. For example, this special rule 

applies when an employee dies at age 

67, the spouse (who is age 68) elects the 

10-year rule, the spouse takes a 

distribution in the 6th calendar year 

following the employee’s death (the 

calendar year in which the spouse is age 

74 and the employee would have been 

age 73) and the surviving spouse is 

rolling over a part of that distribution to 

the spouse’s own IRA (but the rule 

would not apply if the distribution 

occurred in the calendar year that the 

surviving spouse attained age 71 or an 

earlier year). 

Under this special rule, the portion of 

the distribution that is treated as a 

required minimum distribution is the 

cumulative total, over a span of years, 

of the hypothetical required minimum 

distribution for each year had the life 

expectancy rule applied (or, in the case 

of a defined benefit plan, had the 

annuity payment rule applied), reduced 

by any amounts actually distributed to 

the surviving spouse during that span of 

years. The span of years begins with the 

first applicable year (defined as the later 

of the calendar year in which the 

surviving spouse reaches age 72 and the 

calendar year in which the employee 

would have reached age 72) and ends in 

the year of distribution. 

In calculating the hypothetical 

required minimum distributions from a 

defined contribution plan for a calendar 

year under this special rule, the 

proposed regulations provide that an 

adjusted account balance is used. The 

adjusted account balance for a calendar 

year is determined by reducing the 

account balance that normally would be 

used to determine the required 

minimum distribution for that year by 

the excess (if any) of: (1) The sum of the 

hypothetical required minimum 

distributions beginning with the first 

applicable year and ending with the 

calendar year preceding the calendar 

year of the determination, over (2) the 

distributions actually made to the 

surviving spouse during those calendar 

years. 

III. Section 403(b) Regulations 

A. Section 1.403(b)–6(e)—Minimum 

Required Distributions for Eligible Plans 

These proposed regulations amend 

§ 1.403(b)–6(e) to conform that 

paragraph (which sets forth the required 

minimum distribution rules for a 

section 403(b) contract) to the changes 

made to section 401(a)(9) under the 

SECURE Act. For example, pursuant to 

the change in the required beginning 

date under section 114 of the SECURE 

Act, these proposed regulations change 

the reference to age 701⁄2 in the current 

regulations to the required beginning 

date as determined under § 1.401(a)(9)– 

2(b). 

These proposed regulations also 

amend § 1.403(b)–6(e) to provide that 

the exception from the applicability of 

section 401(a)(9)(H) for qualified 

annuities provided in section 401(b)(4) 

of the SECURE Act applies in the case 

of a section 403(b)(9) retirement income 

account even if a commercial annuity 

(as defined in section 3405(e)(6) of the 

Code) is not used, provided that all of 

the other requirements for the qualified 

annuity exception are satisfied. 

B. Request for Comments Regarding 

Required Minimum Distributions From 

Section 403(B) Plans 

Under § 1.403(b)–6(e), the required 

minimum distribution rules applicable 

to IRAs apply to section 403(b) 

contracts, and, in general, the required 

minimum distribution rules for section 

403(b) plans are applied in accordance 

with § 1.408–8. Thus, for example, 

under § 1.403(b)–6(e)(7), a required 

minimum distribution owed with 

respect to one section 403(b) contract of 

an individual is permitted to be 

distributed from another section 403(b) 


jspears on DSK121TN23PROD with PROPOSALS3
10520 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

contract of the same individual. 

Although IRA trustees are required, on 

Form 5498, IRA Contribution 

Information, to report to the IRS and 

provide to IRA owners certain 

information regarding required 

minimum distributions (such as 

whether a required minimum 

distribution is due for a year and the 

account balance on which the required 

minimum distribution will be based), 

Notice 2002–27, 2002–18 I.R.B. 814, 

provides that no reporting is required 

with respect to required minimum 

distributions from section 403(b) 

contracts. Accordingly, a section 403(b) 

plan is neither required to automatically 

make a required minimum distribution 

for a participant nor required to inform 

the IRS or the participant that a required 

minimum distribution is due or the 

account balance on which the 

distribution is based. 

The required minimum distribution 

rules applicable to section 403(b) 

contracts were developed before 2007 

when the section 403(b) regulations 

were issued and made section 403(b) 

plans more like employer-sponsored 

qualified plans rather than IRAs, 

including requiring employers to adopt 

a written plan document that describes 

employer responsibilities under the 

plan. The existing regulations also 

provide that section 403(b) plans 

determine the required beginning date 

in accordance with the rules applicable 

to qualified plans rather than the rules 

applicable to IRAs, and that the 

qualified plan rules related to the 

purchase of a QLAC apply to section 

403(b) plans rather than the 

corresponding IRA rules. These 

proposed regulations further treat a 

section 403(b) plan like a qualified plan 

in that the distributions or deemed 

distributions not taken into account in 

determining the required minimum 

distribution for a calendar year are the 

distributions or deemed distributions 

described in the qualified plan rules 

rather than the IRA rules. 

The Treasury Department and the IRS 

are considering additional changes to 

the required minimum distribution 

rules for section 403(b) plans so that 

they more closely follow the required 

minimum distribution rules for 

qualified plans. For example, under this 

approach, each section 403(b) plan (like 

each qualified plan) would be required 

to make required minimum 

distributions calculated with respect to 

that plan (rather than rely on the 

employee to request distributions from 

another plan in an amount that satisfies 

the requirement). These changes would 

treat similar employer-sponsored plans 

consistently and may facilitate 

compliance with the required minimum 

distribution rules. 

The Treasury Department and the IRS 

request comments on these possible 

changes to the required minimum 

distribution rules for section 403(b) 

plans, including: (1) Any administrative 

concerns; (2) any differences between 

the structure or administration of 

section 403(b) plans and of qualified 

plans that should be taken into account 

in applying the required minimum 

distribution rules for qualified plans to 

section 403(b) plans; and (3) any 

transition rules that would ease the 

implementation of these possible 

changes. 

IV. Section 1.408–8—Distribution 

Requirements for IRAs 

These proposed regulations amend 

§ 1.408–8 (which sets forth the required 

minimum distribution rules for IRAs) to 

implement the changes made to section 

401(a)(9) under the SECURE Act. For 

example, pursuant to the change in the 

required beginning date under section 

114 of the SECURE Act, these proposed 

regulations change the references to age 

701⁄2 in the current regulations to the 

required beginning date as determined 

under § 1.401(a)(9)–2(b)(3). This change 

reflects that the IRA owner’s required 

beginning date is April 1 of the calendar 

year after the calendar year in which the 

individual attains age 72 (or 701⁄2 in the 

case of an IRA owner born before July 

1, 1949). These proposed regulations 

also provide that the owner of a Roth 

IRA is not required to begin 

distributions during the owner’s lifetime 

(consistent with existing § 1.408A–6, 

Q&A–14 and 15). 

These proposed regulations 

incorporate the rules in Notice 2007–7, 

Q&A–17 and 19 (relating to the 

carryover of the method of determining 

required minimum distributions from a 

distributing plan to a receiving IRA 

when a beneficiary is making a transfer 

described in section 402(c)(11)). In 

addition, these proposed regulations 

extend those rules to provide 

comparable treatment to a surviving 

spouse in light of the extension of the 

5-year period to a 10-year period 

pursuant to section 401(a)(9)(H). 

Specifically, these proposed regulations 

provide that, if an employee dies before 

the employee’s required beginning date 

after designating the employee’s spouse 

as a beneficiary, and the surviving 

spouse rolls over a distribution from the 

qualified plan to an IRA in the name of 

the decedent, then any distribution 

method that was elected under the 

qualified plan also will apply to the IRA 

that receives the rollover. The same rule 

applies in the case of an IRA owner who 

dies before the required beginning date 

(so that, if the surviving spouse rolls 

over a distribution to an IRA in the 

name of the decedent, then the 

distribution method that was elected 

under the distributing IRA will also 

apply to the IRA that receives the 

rollover). 

These proposed regulations also 

provide an exception to the rules in the 

preceding paragraph providing for 

comparable treatment between 

surviving spouse beneficiaries and other 

designated beneficiaries. Under this 

exception, a surviving spouse, to whom 

the 5-year rule or 10-year rule applies 

and who rolls over a distribution from 

a plan (or an IRA) to an IRA in the 

decedent’s name, may elect to have 

distributions from the IRA that receives 

the rollover be subject to the life 

expectancy rule (rather than the 5-year 

rule or 10-year rule). The deadline for 

making this election is the deadline that 

would have applied for an election 

between the 5-year rule (or 10-year rule) 

and the life expectancy rule (or annuity 

payment rule) had the distributing plan 

provided for an election between those 

rules by the beneficiary. As described in 

Section II.D. of this Explanation of 

Provisions, if this election is made, then 

the portion of a distribution that is 

treated as the required minimum 

distribution also will be calculated 

using the life expectancy rule (or 

annuity payment rule). 

The proposed rules described in the 

preceding two paragraphs also are 

proposed to apply to a non-spouse 

beneficiary who is making a transfer 

described in section 402(c)(11) 

(incorporating the rules of Notice 2007– 

7, Q&A–17 and 19). Thus, for example, 

if an eligible designated beneficiary 

elects the 10-year rule and, in the 

seventh calendar year after the calendar 

year of the employee’s death, that 

beneficiary elects for a distribution to be 

made in the form of a direct transfer of 

the employee’s interest under the plan 

to an IRA in the name of the decedent, 

then the amount transferred 

nevertheless must be distributed by the 

end of the tenth calendar year following 

the calendar year of the employee’s 

death. However, if the distribution is 

made by the end of the calendar year 

following the year the employee dies, 

then the beneficiary would be permitted 

to make an election to have the life 

expectancy rule apply under the IRA. 

These new rules relating to the 

distribution method of the receiving IRA 

do not apply to a surviving spouse when 

that spouse is rolling over a distribution 

to the spouse’s own account in a 

qualified plan or to the spouse’s own 

IRA (because distributions would then 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10521 

be made in accordance with section 

401(a)(9)(A) instead of section 

401(a)(9)(B)). In that case, these 

proposed regulations provide that the 

amount of the distribution treated as a 

required minimum distribution, and 

thus not eligible to be rolled over, is 

determined in accordance with 

§ 1.402(c)–2(j) (including the new rule 

under which in certain circumstances a 

spouse who elects the 10-year rule is 

required to treat a portion of any 

distribution as a required minimum 

distribution under the life expectancy 

rule). 

To coordinate with these rules, the 

proposed regulations provide a deadline 

for the election under which a surviving 

spouse may elect to treat a decedent’s 

IRA as the spouse’s own. Specifically, a 

surviving spouse must make that 

election by the later of (1) the end of the 

calendar year in which the surviving 

spouse reaches age 72, and (2) the end 

of the calendar year following the 

calendar year of the IRA owner’s death. 

This new deadline should not disrupt 

the normal application of the election, 

because the primary purpose for not 

making an immediate election is for a 

surviving spouse who has not yet 

reached age 591⁄2 to take advantage of 

the section 72(t)(2)(A)(ii) exception to 

the 10% additional income tax on early 

withdrawals made by a beneficiary. If 

the surviving spouse were to miss the 

deadline provided for in these proposed 

regulations, that surviving spouse still 

would be permitted to roll over 

distributions to the spouse’s own IRA 

but would be subject to the special rule 

on the catch-up of hypothetical required 

minimum distributions described in 

Section II.D of this Explanation of 

Provisions. 

These proposed regulations also 

provide that any beneficiary (including 

a non-individual beneficiary) may 

aggregate IRAs that are inherited from 

the same decedent when determining 

the amount that is a required minimum 

distribution. Thus, for example, if a 

trust is the beneficiary of two IRAs that 

are inherited from the same decedent, 

the trustee may aggregate those IRAs 

when determining the amount that is a 

required minimum distribution and take 

that aggregate amount from either one of 

the IRAs. 

V. Section 1.457–6(d)—Minimum 

Required Distributions for Eligible 

Plans 

These proposed regulations delete a 

sentence in § 1.457–6(d) that describes 

section 401(a)(9), because the sentence 

refers to age 701⁄2, and is no longer 

accurate following the amendment to 

the definition of required beginning date 

under section 114 of the SECURE Act. 

VI. Section 54.4974–1—Excise Tax on 

Accumulations in Qualified Retirement 

Plans 

These proposed regulations provide 

amendments to § 54.4974–2 (which is 

renumbered as § 54.4974–1) to conform 

the rules to the changes made to section 

401(a)(9) under the SECURE Act. For 

example, the rules for determining the 

required minimum distribution when 

the 5-year rule applies are expanded to 

include rules for determining the 

required minimum distribution when 

the 10-year rule applies. 

These proposed regulations also 

provide two situations in which an 

automatic waiver of the excise tax 

applies, one of which is based on the 

automatic waiver in the existing 

regulation. The first situation in which 

the automatic waiver applies is when: 

(1) The employee (or in the case of an 

IRA, the IRA owner) died before the 

required beginning date; (2) the payee is 

an eligible designated beneficiary who 

did not make an affirmative election to 

use the life expectancy rule but 

otherwise is subject to the life 

expectancy rule pursuant to a plan 

provision or the regulatory default 

provision that applies in the absence of 

a plan provision; (3) the payee did not 

satisfy the required minimum 

distribution requirements; and (4) the 

payee elects for the employee’s or IRA 

owner’s entire interest to be distributed 

under the 10-year rule. In that case, 

once the payee elects the 10-year rule, 

the payee’s required minimum 

distribution in the tenth calendar year 

following the calendar year of the 

employee’s or IRA owner’s death is the 

entire account balance. 

The second situation in which an 

automatic waiver applies is in the case 

of an individual who had a minimum 

distribution requirement in a calendar 

year and died in that calendar year 

before satisfying that minimum 

distribution requirement. In this 

situation, the individual’s beneficiary 

must satisfy the minimum distribution 

requirement by the end of that calendar 

year. However, if that beneficiary fails to 

satisfy the minimum distribution 

requirement in that calendar year, then 

the excise tax for the failure to take the 

distribution is automatically waived 

provided that the beneficiary satisfies 

that requirement no later than that 

beneficiary’s tax filing deadline 

(including extensions thereof). 

Applicability Dates 

Amended §§ 1.401(a)(9)–1 through 

1.401(a)(9)–9, 1.403(b)–6(e), and 1.408– 

8 are proposed to apply for purposes of 

determining required minimum 

distributions for calendar years 

beginning on or after January 1, 2022. 

Amended § 1.402(c)–2 is proposed to 

apply for distributions on or after 

January 1, 2022. Amended § 54.4974–1 

is proposed to apply for taxable years 

beginning on or after January 1, 2022. 

For the 2021 distribution calendar year, 

taxpayers must apply the existing 

regulations, but taking into account a 

reasonable, good faith interpretation of 

the amendments made by sections 114 

and 401 of the SECURE Act. 

Compliance with these proposed 

regulations will satisfy that requirement. 

Special Analyses 

These regulations are not subject to 

review under section 6(b) of Executive 

Order 12866 pursuant to the 

Memorandum of Agreement (April 11, 

2018) between the Treasury Department 

and the Office of Management and 

Budget regarding review of tax 

regulations. 

Pursuant to the Regulatory Flexibility 

Act (5 U.S.C. chapter 6), it is hereby 

certified that the regulations will not 

have a significant economic impact on 

a substantial number of small entities. 

These proposed regulations do not 

impose new compliance burdens and 

are not expected to result in 

economically meaningful changes in 

behavior relative to the existing 

regulations. The election described in 

§ 1.401(a)(9)–3(b)(4)(iii) and (c)(5)(iii) is 

expected to be an unusual occurrence 

for small entities because few 

individuals with benefits in retirement 

plans maintained by small entities are 

likely to make these elections. In the 

case of § 1.401(a)(9)–4(e)(7), when 

determining whether a designated 

beneficiary is disabled or chronically ill, 

the reporting burden is primarily on the 

designated beneficiary rather than the 

plan sponsor. In the case of 

§ 1.401(a)(9)–4(h), when determining 

required minimum distributions in 

cases in which a plan participant wishes 

to designate a trust as beneficiary of the 

participant’s benefit, the reporting 

burden is primarily on the plan 

participant, or the trustee of the trust 

named as beneficiary, to supply 

information rather than on the entity 

maintaining the retirement plan. In 

addition, the number of participants per 

plan to whom the burden applies is 

likely to be small. In § 1.403(b)– 

3(e)(6)(ii), the recordkeeping burden 

with respect to section 403(b) contracts 

under which the pre-1987 account 

balance must be maintained only 

applies to issuers and custodians of 

those contracts, which generally are not 


jspears on DSK121TN23PROD with PROPOSALS3
10522 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

small entities. Therefore, a regulatory 

flexibility analysis under the Regulatory 

Flexibility Act is not required. Treasury 

and IRS invite comments on the impact 

of these regulations on small entities. 

Pursuant to section 7805(f) of the Code, 

these proposed regulations will be 

submitted to the Chief Counsel for 

Advocacy of the Small Business 

Administration for comment on their 

impact on small business. 

Paperwork Reduction Act 

The collection of information related 

to these proposed regulations under 

sections 401(a)(9) and 403(b) has been 

reviewed in accordance with the 

Paperwork Reduction Act (44 U.S.C. 

3507) and approved by the Office of 

Management and Budget under control 

number 1545–0047. 

Comments concerning the collection 

of information and the accuracy of 

estimated average annual burden and 

suggestions for reducing this burden 

should be sent to the Office of 

Management and Budget, Attn: Desk 

Officer for the Department of the 

Treasury, Office of Information and 

Regulatory Affairs, Washington, DC 

20503, with copies to the Internal 

Revenue Service, IRS Reports Clearance 

Officer, SE:W:CAR:MP:T:T:SP, 

Washington, DC 20224. Comments on 

the burden associated with this 

collection of information must be 

received by April 25, 2022. 

Comments 

Before the proposed amendments are 

adopted as final regulations, 

consideration will be given to any 

comments that are submitted timely to 

the IRS as prescribed in this preamble 

under the ADDRESSES section. The 

Treasury Department and the IRS 

request comments on all aspects of the 

proposed regulations. Any electronic 

comments submitted, and to the extent 

practicable any paper comments 

submitted, will be made available at 

www.regulations.gov or upon request 

Statement of Availability of IRS 

Documents 

IRS Revenue Procedures, Revenue 

Rulings notices, and other guidance 

cited in this document are published in 

the Internal Revenue Bulletin (or 

Cumulative Bulletin) and are available 

from the Superintendent of Documents, 

U.S. Government Publishing Office, 

Washington, DC 20402, or by visiting 

the IRS website at http://www.irs.gov. 

Drafting Information 

The principal authors of these 

proposed regulations are Brandon M. 

Ford and Laura B. Warshawsky, of the 

Office of the Associate Chief Counsel 

(Employee Benefits, Exempt 

Organizations, and Employment Taxes). 

However, other personnel from the 

Treasury Department and the IRS 

participated in the development of the 

proposed regulations. 

List of Subjects 

26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

26 CFR Part 54 

Excise taxes, Pensions, Reporting and 

recordkeeping requirements. 

Proposed Amendments to the 

Regulations 

Accordingly, 26 CFR parts 1 and 54 

are proposed to be amended as follows: 

PART 1—INCOME TAX 

■ Paragraph 1. The authority citation 

for part 1 continues to read in part as 

follows: 

Authority: 26 U.S.C. 7805, unless 

otherwise noted. 

■ Par. 2. Revise sections 1.401(a)(9)–0 

through 1.401(a)(9)–8 to read as follows: 

§ 1.401(a)(9)–0 Required minimum 

distributions; table of contents. 

This table of contents lists the 

regulations relating to required 

minimum distributions under section 

401(a)(9) of the Internal Revenue Code 

as follows: 

§ 1.401(a)(9)–1 Minimum distribution 

requirement in general. 

(a) Plans subject to minimum distribution 

requirement. 

(1) In general. 

(2) Participant in multiple plans. 

(3) Governmental plans. 

(b) Statutory effective date. 

(1) In general. 

(2) Applicability date for section 

401(a)(9)(H). 

(3) Examples. 

(c) Required and optional plan provisions. 

(1) Required provisions. 

(2) Optional provisions. 

(d) Regulatory effective date. 

§ 1.401(a)(9)–2 Distributions commencing 

during an employee’s lifetime. 

(a) Distributions commencing during an 

employee’s lifetime. 

(1) In general. 

(2) Amount required to be distributed for 

a calendar year. 

(3) Distributions commencing before 

required beginning date. 

(4) Distributions after death. 

(b) Determination of required beginning 

date. 

(1) General rule. 

(2) Employees born before July 1, 1949. 

(3) Required beginning date for 5-percent 

owner. 

(4) Uniform required beginning date. 

§ 1.401(a)(9)–3 Death before required 

beginning date. 

(a) In general. 

(b) Distribution requirements in the case of 

a defined benefit plan. 

(1) In general. 

(2) 5-year rule. 

(3) Annuity payments. 

(4) Determination of which rule applies. 

(c) Distributions in the case of a defined 

contribution plan. 

(1) In general. 

(2) 5-year rule. 

(3) 10-year rule. 

(4) Life expectancy payments. 

(5) Determination of which rule applies. 

(d) Permitted delay for surviving spouse 

beneficiaries. 

(e) Distributions that commence after 

surviving spouse’s death. 

(1) In general. 

(2) Remarriage of surviving spouse. 

(3) When distributions are treated as 

having begun to surviving spouse. 

§ 1.401(a)(9)–4 Determination of the 

designated beneficiary. 

(a) Beneficiary designated under the plan. 

(1) In general. 

(2) Entitlement to employee’s interest in 

the plan. 

(3) Specificity of beneficiary designation. 

(4) Affirmative and default elections of 

designated beneficiary. 

(b) Designated beneficiary must be an 

individual. 

(c) Rules for determining beneficiaries. 

(1) Time period for determining the 

beneficiary. 

(2) Circumstances under which a 

beneficiary is disregarded as a beneficiary of 

the employee. 

(3) Examples. 

(d) Application of beneficiary designation 

rules to surviving spouse. 

(e) Eligible designated beneficiaries. 

(1) In general. 

(2) Multiple designated beneficiaries. 

(3) Determination of age of majority. 

(4) Disabled individual. 

(5) Chronically ill individual. 

(6) Individual not more than 10 years 

younger than the employee. 

(7) Documentation requirements for 

disabled or chronically ill individuals. 

(8) Applicability of definition of eligible 

designated beneficiary to beneficiary of 

surviving spouse. 

(9) Examples. 

(f) Special rules for trusts. 

(1) Look-through of trust to determine 

designated beneficiaries. 

(2) Trust requirements. 

(3) Trust beneficiaries treated as 

beneficiaries of the employee. 

(4) Multiple trust arrangements. 

(5) Identifiability of trust beneficiaries. 

(6) Examples. 

(g) Applicable multi-beneficiary trusts. 

(1) General definition of an applicable 

multi-beneficiary trust. 

(2) Type I applicable multi-beneficiary 

trust. 

(3) Type II applicable multi-beneficiary 

trust. 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10523 

(h) Documentation requirements for trusts. 

(1) General rule. 

(2) Required minimum distributions while 

employee is still alive. 

(3) Required minimum distributions after 

death. 

(4) Relief for discrepancy between trust 

instrument and employee certifications or 

earlier trust instruments. 

§ 1.401(a)(9)–5 Required minimum 

distributions from defined contribution 

plans. 

(a) General rules. 

(1) In general. 

(2) Distribution calendar year. 

(3) Time for distributions. 

(4) Minimum distribution incidental 

benefit requirement. 

(5) Annuity contracts. 

(6) Impact of additional distributions in 

prior years. 

(b) Determination of account balance. 

(1) General rule. 

(2) Adjustment for subsequent allocations. 

(3) Adjustment for subsequent 

distributions. 

(4) Exclusion for QLAC contract. 

(5) Treatment of rollovers. 

(c) Determination of applicable 

denominator during employee’s lifetime. 

(1) General rule. 

(2) Spouse is sole beneficiary. 

(d) Applicable denominator after 

employee’s death. 

(1) Death on or after the employee’s 

required beginning date. 

(2) Death before an employee’s required 

beginning date. 

(3) Remaining life expectancy. 

(e) Distribution of employee’s entire 

interest required. 

(1) In general. 

(2) 10-year limit for designated beneficiary 

who is not an eligible designated beneficiary. 

(3) 10-year limit following death of eligible 

designated beneficiary. 

(4) 10-year limit after minor child of the 

employee reaches age of majority. 

(5) Life expectancy limit for older eligible 

designated beneficiaries. 

(f) Rules for multiple designated 

beneficiaries. 

(1) Determination of applicable 

denominator. 

(2) Determination of when entire interest is 

required to be distributed. 

(g) Treatment of nonvested amounts. 

(h) Distributions taken into account. 

§ 1.401(a)(9)–6 Required minimum 

distributions for defined benefit plans 

and annuity contracts. 

(a) Defined benefit plans. 

(1) In general. 

(2) Definition of life annuity. 

(3) Annuity commencement. 

(4) Single-sum distributions. 

(5) Death benefits. 

(6) Separate treatment of separate 

identifiable components. 

(7) Additional guidance. 

(b) Application of incidental benefit 

requirement. 

(1) Life annuity for employee. 

(2) Joint and survivor annuity. 

(3) Period certain and annuity features. 

(4) Deemed satisfaction of incidental 

benefit rule. 

(c) Period certain annuity. 

(1) Distributions commencing during the 

employee’s life. 

(2) Distributions commencing after the 

employee’s death. 

(d) Use of annuity contract. 

(e) Treatment of additional accruals. 

(1) General rule. 

(2) Administrative delay. 

(f) Treatment of nonvested benefits. 

(g) Requirement for actuarial increase. 

(1) General rule. 

(2) Nonapplication to 5-percent owners. 

(3) Nonapplication to governmental and 

church plans. 

(h) Amount of actuarial increase. 

(1) In general. 

(2) Actuarial equivalence basis. 

(3) Coordination with section 411 actuarial 

increase. 

(i) [Reserved]. 

(j) Distributions restricted pursuant to 

section 436. 

(1) General rule. 

(2) Payments restricted under section 

436(d)(3). 

(3) Payments restricted under section 

436(d)(1) or (2). 

(k) Treatment of early commencement. 

(1) General rule. 

(2) Joint and survivor annuity, nonspouse 

beneficiary. 

(3) Limitation on period certain. 

(l) Early commencement for surviving 

spouse. 

(m) Determination of entire interest under 

annuity contract. 

(1) General rule. 

(2) Entire interest. 

(3) Exclusions. 

(4) Examples. 

(n) Change in annuity payment period. 

(1) In general. 

(2) Reannuitization. 

(3) Conditions. 

(4) Examples. 

(o) Increase in annuity payments. 

(1) General rules. 

(2) Eligible cost of living index. 

(3) Additional permitted increases for 

certain annuity contracts purchased from 

insurance companies. 

(4) Additional permitted increases for all 

annuity contracts purchased from insurance 

companies. 

(5) Additional permitted increases for 

annuity payments from a qualified trust. 

(6) Definitions. 

(7) Examples. 

(p) Payments to children. 

(1) In general. 

(2) Age of majority. 

(q) Qualifying longevity annuity contract. 

(1) Definition of qualifying longevity 

annuity contract. 

(2) Limitations on premiums. 

(3) Payments after death of the employee. 

(4) Rules of application. 

§ 1.401(a)(9)–7 Rollovers and transfers. 

(a) Treatment of rollover from distributing 

plan. 

(b) Treatment of rollover by receiving plan. 

(c) Treatment of transfer under transferor 

plan. 

(1) Generally not treated as distribution. 

(2) Account balance decreased after 

transfer. 

(d) Treatment of transfer under transferee 

plan. 

(e) Treatment of spinoff or merger. 

§ 1.401(a)(9)–8 Special rules. 

(a) Use of separate accounts 

(1) Separate application of section 401(a)(9) 

for beneficiaries. 

(2) Separate accounting requirements. 

(b) Application of consent requirements. 

(c) Definition of spouse. 

(d) Treatment of QDROs. 

(1) Continued treatment of spouse. 

(2) Separate accounts. 

(3) Other situations. 

(e) Application of section 401(a)(9) 

pending determination of whether a domestic 

relations order is a QDRO is being made. 

(f) Application of section 401(a)(9) when 

insurer is in state delinquency proceedings. 

(g) In-service distributions required to 

satisfy section 401(a)(9). 

(h) TEFRA section 242(b) elections. 

(1) In general. 

(2) Application of section 242(b) election 

after transfer. 

(3) Application of section 242(b) election 

after rollover. 

(4) Revocation of section 242(b) election. 

§ 1.401(a)(9)–9 Life expectancy and 

distribution period tables. 

(a) In general. 

(b) Single Life Table. 

(c) Uniform Life Table. 

(d) Joint and Last Survivor Table. 

(e) Mortality rates. 

(f) Applicability dates. 

(1) In general. 

(2) Application to life expectancies that 

may not be recalculated. 

§ 1.401(a)(9)–1 Minimum distribution 

requirement in general. 

(a) Plans subject to minimum 

distribution requirement—(1) In general. 

Under section 401(a)(9), all stock bonus, 

pension, and profit-sharing plans 

qualified under section 401(a) and 

annuity contracts described in section 

403(a) are subject to required minimum 

distribution rules. See this section and 

§§ 1.401(a)(9)–2 through 1.401(a)(9)–9 

for the distribution rules applicable to 

these plans. Under section 403(b)(10), 

annuity contracts and custodial 

accounts described in section 403(b) are 

subject to required minimum 

distribution rules. See § 1.403(b)–6(e) 

for the distribution rules applicable to 

these annuity contracts and custodial 

accounts. Under section 408(a)(6) and 

408(b)(3), individual retirement 

accounts and individual retirements 

annuities (collectively, IRAs) are subject 

to required minimum distribution rules. 

See § 1.408–8 for the minimum 

distribution rules applicable to IRAs 

and § 1.408A–6 for the minimum 

distribution rules applicable to Roth 

IRAs under section 408A. Under section 


jspears on DSK121TN23PROD with PROPOSALS3
10524 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

457(d)(2), eligible deferred 

compensation plans described in 

section 457(b) for employees of taxexempt organizations or employees of 

State and local governments are subject 

to required minimum distribution rules. 

See § 1.457–6(d) for the minimum 

distribution rules applicable to those 

eligible deferred compensation plans. 

(2) Participant in multiple plans. If an 

employee is a participant in more than 

one plan, the plans in which the 

employee participates are not permitted 

to be aggregated for purposes of testing 

whether the distribution requirements 

of section 401(a)(9) are met. Thus, the 

distribution of the benefit of the 

employee under each plan must 

separately meet the requirements of 

section 401(a)(9). For this purpose, a 

plan described in section 414(k) is 

treated as two separate plans, a defined 

contribution plan to the extent benefits 

are based on an individual account and 

a defined benefit plan with respect to 

the remaining benefits. 

(3) Governmental plans. A 

governmental plan (within the meaning 

of section 414(d)), or an eligible 

governmental plan described in § 1.457– 

2(f), is treated as having complied with 

section 401(a)(9) if the plan complies 

with a reasonable, good faith 

interpretation of section 401(a)(9). Thus, 

the terms of a governmental plan that 

reflect a reasonable, good faith 

interpretation of section 401(a)(9) do not 

have to provide that distributions will 

be made in accordance with this section 

and §§ 1.401(a)(9)–2 through 

1.401(a)(9)–9. Similarly, a governmental 

plan may apply the rules of section 

401(a)(9)(F) using the rules of 26 CFR 

1.401(a)(9)–6, Q&A–15 (revised as of 

April 1, 2021). 

(b) Statutory effective date—(1) In 

general. The distribution rules of 

section 401(a)(9) generally apply to all 

account balances and benefits in 

existence on or after January 1, 1985. 

(2) Applicability date for section 

401(a)(9)(H)—(i) General effective date. 

Except as provided in this paragraph (b), 

section 401(a)(9)(H) applies with respect 

to employees who die on or after 

January 1, 2020. However, in the case of 

a governmental plan (as defined in 

section 414(d)), section 401(a)(9)(H) 

applies with respect to employees who 

die on or after January 1, 2022. 

(ii) Delayed applicability date for 

collectively bargained plans—(A) 

General rule. In the case of a plan 

maintained pursuant to one or more 

collective bargaining agreements 

between employee representatives and 

one or more employers ratified before 

December 20, 2019 (the date of 

enactment of the Further Consolidated 

Appropriations Act, Pub. L. 116–94, 133 

Stat. 2534 (2019)), section 401(a)(9)(H) 

generally applies with respect to 

employees who die on or after January 

1, 2022. 

(B) Earlier application if agreements 

terminate. Notwithstanding paragraph 

(b)(2)(ii)(A) of this section, section 

401(a)(9)(H) applies to a plan 

maintained pursuant to one or more 

collective bargaining agreements with 

respect to employees who die in 2020 or 

2021 if— 

(1) The year in which the employee 

dies begins after the date on which the 

last of the collective bargaining 

agreements described in paragraph 

(b)(2)(ii)(A) of this section terminates 

(determined without regard to any 

extension thereof to which the parties 

agreed on or after December 20, 2019), 

and 

(2) Section 401(a)(9)(H) would apply 

with respect to the employee under the 

rules of paragraph (b)(2)(i) of this 

section. 

(C) Rules of application. For purposes 

of this paragraph (b)(2)(ii)— 

(1) A plan is treated as maintained 

pursuant to one or more collective 

bargaining agreements only if the plan 

constitutes a collectively bargained plan 

under the rules of § 1.436–1(a)(5)(ii)(B), 

and 

(2) Any plan amendment made 

pursuant to a collective bargaining 

agreement that amends the plan solely 

to conform to the requirements of 

section 401(a)(9)(H) is not treated as a 

termination of the collective bargaining 

agreement. 

(iii) Applicability upon death of 

designated beneficiary—(A) In general. 

Except as otherwise provided in this 

paragraph (b)(2)(iii), if an employee who 

died before the effective date described 

in paragraph (b)(2)(i) or (ii) of this 

section (whichever applies to the plan) 

has only one designated beneficiary and 

that beneficiary dies on or after that 

effective date, then, upon the death of 

the designated beneficiary, section 

401(a)(9)(H) applies with respect to any 

beneficiary of the employee’s designated 

beneficiary. Section 401(b)(5) of 

Division O of the Further Consolidated 

Appropriations Act (known as the 

SECURE Act), provides that, if an 

employee dies before the effective date, 

then a designated beneficiary of an 

employee is treated as an eligible 

designated beneficiary. Accordingly, 

once the rules of section 401(a)(9)(H) 

apply with respect to the employee’s 

designated beneficiary, the rules of 

section 401(a)(9)(H)(iii) (requiring full 

distribution of the employee’s interest 

within 10 years after the death of an 

eligible designated beneficiary) apply 

upon the designated beneficiary’s death. 

(B) Employee with multiple 

designated beneficiaries. If an employee 

described in paragraph (b)(2)(iii)(A) of 

this section has more than one 

designated beneficiary, then whether 

section 401(a)(9)(H) applies is 

determined based on the date of death 

of the oldest of the employee’s 

designated beneficiaries. Thus, section 

401(a)(9)(H) will apply upon the death 

of the oldest of the employee’s 

designated beneficiaries if that 

designated beneficiary is still alive on or 

after the effective date of section 

401(a)(9)(H) for the plan as determined 

under the rules of paragraph (b)(2)(i) or 

(ii) of this section. 

(C) Surviving spouse of the employee 

dies before employee’s required 

beginning date. If an employee 

described in paragraph (b)(2)(iii)(A) of 

this section dies before the employee’s 

required beginning date and the 

employee’s surviving spouse is waiting 

to begin distributions until the year for 

which the employee would have been 

required to begin distributions pursuant 

to section 401(a)(9)(B)(iv), then, in 

applying the rules of this paragraph 

(b)(2)(iii), the surviving spouse is treated 

as the employee. Thus, for example, if 

an employee with a required beginning 

date of April 1, 2025, names the 

employee’s surviving spouse as the sole 

beneficiary of the employee’s interest in 

the plan, both the employee and the 

employee’s surviving spouse die before 

the effective date of section 401(a)(9)(H) 

for the plan, and that spouse’s 

designated beneficiary dies on or after 

that effective date, then section 

401(a)(9)(H) applies with respect to the 

surviving spouse’s designated 

beneficiary upon the death of that 

designated beneficiary. 

(iv) Qualified annuity exception—(A) 

In general. Section 401(a)(9)(H) does not 

apply to a commercial annuity (as 

defined in section 3405(e)(6))— 

(1) That is a binding annuity contract 

in effect as of December 20, 2019; 

(2) Under which payments satisfy the 

requirements of 26 CFR 1.401(a)(9)–1 

through 1.401(a)(9)–9 (revised as of 

April 1, 2020); and 

(3) That satisfies the irrevocability 

requirements of paragraph (b)(2)(iv)(B) 

of this section. 

(B) Irrevocability requirements 

applicable to annuity contract. A 

contract satisfies the requirements of 

this paragraph (b)(2)(iv)(B) if the 

employee has made an irrevocable 

election before December 20, 2019, as to 

the method and amount of annuity 

payments to the employee and any 

designated beneficiary. 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10525 

(3) Examples. The following examples 

illustrate the effective date requirements 

of this paragraph (b). 

(i) Example 1. Employer M maintains 

a defined contribution plan, Plan X. 

Employee A died in 2017, at the age of 

68, and designated A’s 40-year-old nondisabled, non-chronically ill son, B, as 

the sole beneficiary of A’s interest in 

Plan X. Pursuant to a plan provision in 

Plan X, B elected to take distributions 

over B’s life expectancy under section 

401(a)(9)(B)(iii). B dies in 2024, after the 

effective date of section 401(a)(9)(H). 

Because section 401(b)(5) of the 

SECURE Act treats B as an eligible 

designated beneficiary, the rules of 

section 401(a)(9)(H)(iii) apply to B’s 

beneficiaries. Therefore, A’s remaining 

interest in Plan X must be distributed by 

the end of 2034 (within 10 years of B’s 

death). 

(ii) Example 2. The facts are the same 

as in Example 1 in paragraph (b)(3)(i) of 

this section except that B died in 2019. 

Because A’s designated beneficiary died 

before the effective date of section 401 

of the SECURE Act, the rules of section 

401(a)(9)(H) do not apply to B’s 

beneficiaries. 

(iii) Example 3. The facts are the same 

as in Example 1 in paragraph (b)(3)(i) of 

this section except that, pursuant to a 

provision in Plan X, B elected the 5-year 

rule under section 401(a)(9)(B)(ii). 

Accordingly, A’s entire interest is 

required to be distributed by the end of 

2022. Because A died before January 1, 

2020, section 401(a)(9)(H) does not 

apply with respect to B. Therefore, 

section 401(a)(9)(H)(i)(I) does not extend 

B’s election to a 10-year period. 

Although B’s election requires A’s entire 

interest to be distributed by the end of 

2022, the enactment of section 

401(a)(9)(I)(iii)(II) (permitting disregard 

of 2020 when the 5-year period applies) 

permits distribution of A’s entire 

interest in the plan to be delayed until 

the end of 2023. 

(iv) Example 4. The facts are the same 

as in Example 1 in paragraph (b)(3)(i) of 

this section except that A designates a 

see-through trust that satisfies the 

requirements of § 1.401(a)(9)–4(f)(2) as 

the sole beneficiary of A’s interest in 

Plan X. All of the trust beneficiaries are 

alive as of January 1, 2020. The oldest 

of the trust beneficiaries, C, dies in 

2022. Because section 401(b)(5) of the 

SECURE Act treats C as an eligible 

designated beneficiary, the rules of 

section 401(a)(9)(H)(iii) apply to the 

other trust beneficiaries. Thus, if the 

death of the oldest beneficiary is not 

disregarded under the rules of 

§ 1.401(a)(9)–5(f)(2)(ii), A’s remaining 

interest in Plan X must be distributed by 

the end of 2032 (within 10 years of C’s 

death). 

(v) Example 5. The facts are the same 

as in Example 4 in paragraph (b)(3)(iv) 

of this section except that C dies in 

2019. Because the oldest designated 

beneficiary died before January 1, 2020, 

the rules of section 401(a)(9)(H) do not 

apply to any of the other trust 

beneficiaries. 

(vi) Example 6. The facts are the same 

as in Example 1 in paragraph (b)(3)(i) of 

this section except that B elected to 

purchase an annuity that pays over B’s 

lifetime with a 15-year certain period 

starting in the calendar year following 

the calendar year of A’s death. Because 

B died after the effective date of section 

401(a)(9)(H), the rules of section 

401(a)(9)(H)(iii) apply, and accordingly, 

the annuity may not provide 

distributions any later than the end of 

2034. 

(c) Required and optional plan 

provisions—(1) Required provisions. In 

order to satisfy section 401(a)(9), a plan 

must include the provisions described 

in this paragraph (c)(1) reflecting section 

401(a)(9). First, a plan generally must 

set forth the statutory rules of section 

401(a)(9), including the incidental death 

benefit requirement in section 

401(a)(9)(G). Second, a plan must 

provide that distributions will be made 

in accordance with this section and 

§§ 1.401(a)(9)–2 through 1.401(a)(9)–9. 

A plan document also must provide that 

the provisions reflecting section 

401(a)(9) override any distribution 

options in a plan inconsistent with 

section 401(a)(9). A plan also must 

include any other provisions reflecting 

section 401(a)(9) that are prescribed by 

the Commissioner in revenue rulings, 

notices, and other guidance published 

in the Internal Revenue Bulletin. See 

§ 601.601(d) of this chapter. 

(2) Optional provisions. A plan may 

also include optional provisions 

governing plan distributions that do not 

conflict with section 401(a)(9). For 

example, a defined benefit plan may 

include a provision described in 

§ 1.401(a)(9)–3(b)(4)(ii) (requiring that 

the 5-year rule apply to an employee 

who has a designated beneficiary). 

Similarly, a defined contribution plan 

may provide for an election by an 

eligible designated beneficiary as 

described in § 1.401(a)(9)–3(c)(5)(iii). 

(d) Regulatory effective date—This 

section and §§ 1.401(a)(9)–2 through 

1.401(a)(9)–9 apply for purposes of 

determining required minimum 

distributions for calendar years 

beginning on or after January 1, 2022. 

For earlier calendar years, the rules of 

26 CFR 1.401(a)(9)–1 through 

1.401(a)(9)–9 (revised as of April 1, 

2021) apply. 

§ 1.401(a)(9)–2 Distributions commencing 

during an employee’s lifetime. 

(a) Distributions commencing during 

an employee’s lifetime—(1) In general. 

In order to satisfy section 401(a)(9)(A), 

the entire interest of each employee 

must be distributed to the employee not 

later than the required beginning date, 

or must be distributed, beginning not 

later than the required beginning date, 

over the life of the employee or the joint 

lives of the employee and a designated 

beneficiary or over a period not 

extending beyond the life expectancy of 

the employee or the joint life and last 

survivor expectancy of the employee 

and the designated beneficiary. Under 

section 401(a)(9)(G), lifetime 

distributions must satisfy the incidental 

death benefit requirements of § 1.401– 

1(b)(1). 

(2) Amount required to be distributed 

for a calendar year. The amount 

required to be distributed for each 

calendar year in order to satisfy section 

401(a)(9)(A) and (G) generally depends 

on whether the amount to be distributed 

is from an individual account under a 

defined contribution plan or is an 

annuity payment from a defined benefit 

plan or under an annuity contract. For 

the method of determining the required 

minimum distribution in accordance 

with section 401(a)(9)(A) and (G) from 

an individual account under a defined 

contribution plan, see § 1.401(a)(9)–5. 

For the method of determining the 

required minimum distribution in 

accordance with section 401(a)(9)(A) 

and (G) in the case of annuity payments 

from a defined benefit plan or under an 

annuity contract, see § 1.401(a)(9)–6. 

(3) Distributions commencing before 

required beginning date—(i) In general. 

Lifetime distributions made before the 

employee’s required beginning date for 

calendar years before the employee’s 

first distribution calendar year, as 

defined in § 1.401(a)(9)–5(a)(2)(ii), need 

not be made in accordance with section 

401(a)(9). However, if distributions 

commence before the employee’s 

required beginning date under a 

particular distribution option (such as 

in the form of an annuity) and, under 

the terms of that distribution option, 

distributions to be made for the 

employee’s first distribution calendar 

year (or any subsequent calendar year) 

will fail to satisfy section 401(a)(9), then 

the distribution option fails to satisfy 

section 401(a)(9) at the time 

distributions commence. 

(ii) Date distributions are treated as 

having begun. Except as otherwise 

provided in paragraph (a)(3)(iii) of this 


jspears on DSK121TN23PROD with PROPOSALS3
10526 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

section and § 1.401(a)(9)–6(j), 

distributions to the employee are not 

treated as having begun in accordance 

with section 401(a)(9)(A)(ii) until the 

employee’s required beginning date, as 

determined in accordance with 

paragraph (b)(1), (2), or (3) of this 

section, whichever applies to the 

employee. The preceding sentence 

applies even if the employee has 

received distributions before the 

employee’s required beginning date 

(either pursuant to plan terms that 

require distributions to begin by an 

earlier date or pursuant to the 

employee’s election). Thus, even if 

payments have been made before the 

employee’s required beginning date, the 

rules of § 1.401(a)(9)–3 will apply if the 

employee dies before that date. For 

example, if A is an employee who 

retires in 2023, the calendar year A 

attains age 71, and begins receiving 

installment distributions from a profitsharing plan over a period not 

exceeding the joint life and last survivor 

expectancy of A and A’s spouse, 

benefits are not treated as having begun 

in accordance with section 

401(a)(9)(A)(ii) until April 1, 2025 (the 

April 1 following the calendar year in 

which A attains age 72). Consequently, 

if A dies before April 1, 2025 (A’s 

required beginning date), distributions 

after A’s death must be made in 

accordance with section 401(a)(9)(B)(ii) 

or (iii) and (iv) and § 1.401(a)(9)–3 

(addressing payments to beneficiaries in 

cases in which required distributions 

have not begun), and not section 

401(a)(9)(B)(i) (addressing payments to 

beneficiaries in cases in which required 

distributions have begun). This is the 

case without regard to whether, before 

A’s death, the plan distributed the 

minimum distribution for the first 

distribution calendar year (as defined in 

§ 1.401(a)(9)–5(a)(2)(ii)). 

(iii) Exception for uniform required 

beginning date. If a plan provides, in 

accordance with paragraph (b)(4) of this 

section, that the required beginning date 

for purposes of section 401(a)(9) for all 

employees is April 1 of the calendar 

year following the calendar year 

described in paragraph (b)(1)(i) or 

(b)(2)(i)(A) of this section (whichever 

applies to the employee), without regard 

to whether the employee is a 5-percent 

owner, then an employee who dies on 

or after the required beginning date 

determined under the plan terms is 

treated as dying after distributions have 

begun in accordance with section 

401(a)(9)(A)(ii) (even if the employee 

dies before the April 1 following the 

calendar year in which the employee 

retires). 

(4) Distributions after death. Section 

401(a)(9)(B)(i) provides that, if the 

distribution of the employee’s interest 

has begun in accordance with section 

401(a)(9)(A)(ii), and the employee dies 

before the employee’s entire interest has 

been distributed to the employee, the 

remaining portion of the employee’s 

interest must be distributed at least as 

rapidly as under the distribution 

method being used under section 

401(a)(9)(A)(ii) as of the date of the 

employee’s death. For the method of 

determining the required minimum 

distribution in accordance with section 

401(a)(9)(B)(i) from an individual 

account under a defined contribution 

plan, see § 1.401(a)(9)–5. In the case of 

annuity payments from a defined 

benefit plan or under an annuity 

contract, see § 1.401(a)(9)–6. 

(b) Determination of required 

beginning date—(1) General rule. Except 

as otherwise provided in this paragraph 

(b), the employee’s required beginning 

date (within the meaning of section 

401(a)(9)(C)) is April 1 of the calendar 

year following the later of— 

(i) The calendar year in which the 

employee attains age 72; and 

(ii) The calendar year in which the 

employee retires from employment with 

the employer maintaining the plan. 

(2) Employees born before July 1, 

1949—(i) Prior law general rule. With 

respect to an employee who was born 

before July 1, 1949, except as otherwise 

provided in this paragraph (b), the 

employee’s required beginning date is 

April 1 of the calendar year following 

the later of— 

(A) The calendar year in which the 

employee attains age 701⁄2; and 

(B) The calendar year in which the 

employee retires from employment with 

the employer maintaining the plan. 

(ii) Attainment of age 701⁄2. An 

employee attains age 701⁄2 as of the date 

six calendar months after the 70th 

anniversary of the employee’s birth. For 

example, if the date of birth of an 

employee who retired in 2013 was June 

30, 1943, the 70th anniversary of the 

employee’s birth was June 30, 2013 and 

the employee attained age 701⁄2 on 

December 30, 2013. Consequently, the 

employee’s required beginning date was 

April 1, 2014. However, if the 

employee’s date of birth was July 1, 

1943, the 70th anniversary of the 

employee’s birth was July 1, 2013. The 

employee attained age 701⁄2 on January 

1, 2014, and the employee’s required 

beginning date was April 1, 2015. 

(3) Required beginning date for 5- 

percent owner—(i) In general. In the 

case of an employee who was born on 

or after July 1, 1949, and who is a 5- 

percent owner, the employee’s required 

beginning date is April 1 of the calendar 

year following the calendar year 

described in paragraph (b)(1)(i) of this 

section. In the case of an employee who 

was born before July 1, 1949, and who 

is a 5-percent owner, the employee’s 

required beginning date is April 1 of the 

calendar year following the calendar 

year described in paragraph (b)(2)(i)(A) 

of this section. 

(ii) Definition of 5-percent owner. For 

purposes of section 401(a)(9), a 5- 

percent owner is an employee who is a 

5-percent owner (as defined in section 

416) with respect to the plan year 

ending in the calendar year described in 

paragraphs (b)(1)(i) or (b)(2)(i)(A) of this 

section, whichever applies to the 

employee. 

(iii) No applicability to governmental 

plan or church plan. This paragraph 

(b)(3) does not apply in the case of a 

governmental plan (within the meaning 

of section 414(d)) or a church plan (as 

described in § 1.401(a)(9)–6(g)(3)). 

(4) Uniform required beginning date. 

A plan is permitted to provide that the 

required beginning date for purposes of 

section 401(a)(9) for all employees is 

April 1 of the calendar year following 

the calendar year described in 

paragraphs (b)(1)(i) or (b)(2)(i)(A) of this 

section (whichever applies to the 

employee), without regard to whether 

the employee is a 5-percent owner. 

§ 1.401(a)(9)–3 Death before required 

beginning date. 

(a) In general. Except as otherwise 

provided in §§ 1.401(a)(9)–2(a)(3) and 

1.401(a)(9)–6(j), if an employee dies 

before the employee’s required 

beginning date (and thus before 

distributions are treated as having begun 

in accordance with section 

401(a)(9)(A)(ii)), then— 

(1) In the case of a defined benefit 

plan, distributions are required to be 

made in accordance with paragraph (b) 

of this section, and 

(2) In the case of a defined 

contribution plan, distributions are 

required to be made in accordance with 

paragraph (c) of this section. 

(b) Distribution requirements in the 

case of a defined benefit plan—(1) In 

general. Distributions from a defined 

benefit plan are made in accordance 

with this paragraph (b) if the 

distributions satisfy either paragraph 

(b)(2) or (3) of this section, whichever 

applies with respect to the employee. 

The determination of whether paragraph 

(b)(2) or (3) of this section applies is 

made in accordance with paragraph 

(b)(4) of this section. 

(2) 5-year rule. Except as otherwise 

provided in § 1.401(a)(9)–6(j) (relating to 

defined benefit plans subject to 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10527 

limitations under section 436), 

distributions satisfy this paragraph 

(b)(2) if the employee’s entire interest is 

distributed by the end of the calendar 

year that includes the fifth anniversary 

of the date of the employee’s death. For 

example, if an employee dies on any 

day in 2022, then in order to satisfy the 

5-year rule in section 401(a)(9)(B)(ii), 

the entire interest generally must be 

distributed by the end of 2027. 

(3) Annuity payments. Distributions 

satisfy this paragraph (b)(3) if annuity 

payments that satisfy the requirements 

of § 1.401(a)(9)–6 commence no later 

than the end of the calendar year 

following the calendar year in which the 

employee died, except as provided in 

paragraph (d) of this section (permitting 

a surviving spouse to delay the 

commencement of distributions). 

(4) Determination of which rule 

applies—(i) No plan provision. If a 

defined benefit plan does not provide 

for an optional provision described in 

paragraph (b)(4)(ii) or (b)(4)(iii) of this 

section specifying the method of 

distribution after the death of an 

employee, then distributions must be 

made as follows— 

(A) If the employee has no designated 

beneficiary, as determined under 

§ 1.401(a)(9)–4, distributions must 

satisfy paragraph (b)(2) of this section; 

and 

(B) If the employee has a designated 

beneficiary, distributions must satisfy 

paragraph (b)(3) of this section. 

(ii) Optional plan provisions. A 

defined benefit plan will not fail to 

satisfy section 401(a)(9) merely because 

it includes a provision specifying that 

the 5-year rule in paragraph (b)(2) of this 

section (rather than the annuity 

payment rule in paragraph (b)(3) of this 

section) will apply with respect to some 

or all of the employees who have a 

designated beneficiary. Further, a plan 

need not have the same method of 

distribution for the benefits of all 

employees in order to satisfy section 

401(a)(9). 

(iii) Elections. A defined benefit plan 

may include a provision, applicable to 

an employee who dies before the 

employee’s required beginning date and 

who has a designated beneficiary, that 

permits the employee (or designated 

beneficiary) to elect whether the 5-year 

rule in paragraph (b)(2) of this section 

or the annuity payment rule in 

paragraph (b)(3) of this section applies. 

If a plan provides for this type of an 

election, then— 

(A) The plan must specify the method 

of distribution that applies if neither the 

employee nor the designated beneficiary 

makes the election; 

(B) The election must be made no 

later than the end of the earlier of the 

calendar year by which distributions 

must be made in order to satisfy 

paragraph (b)(2) of this section and the 

calendar year in which distributions 

would be required to begin in order to 

satisfy the requirements of paragraph 

(b)(3) of this section or, if applicable, 

paragraph (d) of this section; and 

(C) As of the last date the election 

may be made, the election must be 

irrevocable with respect to the 

beneficiary (and all subsequent 

beneficiaries) and must apply to all 

subsequent calendar years. 

(c) Distributions in the case of a 

defined contribution plan—(1) In 

general. The requirements of this 

paragraph are satisfied if distributions 

are made in accordance with paragraph 

(c)(2), (3), or (4) of this section, 

whichever applies with respect to the 

employee. The determination of 

whether paragraph (c)(2), (3), or (4) of 

this section applies is made in 

accordance with paragraph (c)(5) of this 

section. 

(2) 5-year rule. Distributions satisfy 

this paragraph (c)(2) if the employee’s 

entire interest is distributed by the end 

of the calendar year that includes the 

fifth anniversary of the date of the 

employee’s death. For example, if an 

employee dies on any day in 2022, the 

entire interest must be distributed by 

the end of 2027 in order to satisfy the 

5-year rule in section 401(a)(9)(B)(ii). 

For purposes of this paragraph (c)(2), if 

an employee died before January 1, 

2020, then the 2020 calendar year is 

disregarded when determining the 

calendar year that includes the fifth 

anniversary of the date of the 

employee’s death. 

(3) 10-year rule. Distributions satisfy 

this paragraph (c)(3) if the employee’s 

entire interest is distributed by the end 

of the calendar year that includes the 

tenth anniversary of the date of the 

employee’s death. For example, if an 

employee dies on any day in 2021, the 

entire interest must be distributed by 

the end of 2031 in order to satisfy the 

5-year rule in section 401(a)(9)(B)(ii), as 

extended to 10 years by section 

401(a)(9)(H)(i). 

(4) Life expectancy payments. 

Distributions satisfy this paragraph 

(c)(4) if distributions that satisfy the 

requirements of § 1.401(a)(9)–5 

commence on or before the end of the 

calendar year following the calendar 

year in which the employee died, except 

as provided in paragraph (d) of this 

section (permitting a surviving spouse 

to delay the commencement of 

distributions). 

(5) Determination of which rule 

applies—(i) No plan provision. If a 

defined contribution plan does not 

include an optional provision described 

in paragraph (c)(5)(ii) or (c)(5)(iii) of this 

section specifying the method of 

distribution after the death of an 

employee, distributions must be made 

as follows— 

(A) If the employee does not have a 

designated beneficiary, as determined 

under § 1.401(a)(9)–4, distributions 

must satisfy the 5-year rule described in 

paragraph (c)(2) of this section; 

(B) If the employee dies on or after the 

effective date of section 401(a)(9)(H) (as 

determined in § 1.401(a)(9)–1(b)(2)(i) or 

(ii), whichever applies to the plan) and 

has a designated beneficiary who is not 

an eligible designated beneficiary, as 

determined under § 1.401(a)(9)–4(e), 

distributions must satisfy the 10-year 

rule described in paragraph (c)(3) of this 

section; and 

(C) If the employee has an eligible 

designated beneficiary, distributions 

must satisfy the life expectancy rule 

described in paragraph (c)(4) of this 

section. 

(ii) Optional plan provisions. A 

defined contribution plan will not fail to 

satisfy section 401(a)(9) merely because 

it includes a provision specifying that 

the 10-year rule described in paragraph 

(c)(3) of this section (rather than the life 

expectancy rule described in paragraph 

(c)(4) of this section) will apply with 

respect to some or all of the employees 

who have an eligible designated 

beneficiary. Further, a plan need not 

have the same method of distribution 

for the benefits of all employees in order 

to satisfy section 401(a)(9). 

(iii) Elections. A defined contribution 

plan may include a provision, 

applicable to an employee who dies 

before the employee’s required 

beginning date and who has an eligible 

designated beneficiary, that permits the 

employee (or eligible designated 

beneficiary) to elect whether the 10-year 

rule in paragraph (c)(3) of this section or 

the life expectancy rule in paragraph 

(c)(4) of this section applies. If a plan 

provides for this type of election, then— 

(A) The plan must specify the method 

of distribution that applies if neither the 

employee nor the designated beneficiary 

makes the election; 

(B) The election must be made no 

later than end of the earlier of the 

calendar year by which distributions 

must be made in order to satisfy 

paragraph (c)(3) of this section and the 

calendar year in which distributions 

would be required to begin in order to 

satisfy the requirements of paragraph 

(c)(4) of this section or, if applicable, 

paragraph (d) of this section; and 


jspears on DSK121TN23PROD with PROPOSALS3
10528 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

(C) As of the last date the election 

may be made, the election must be 

irrevocable with respect to the 

beneficiary (and all subsequent 

beneficiaries) and must apply to all 

subsequent calendar years. 

(d) Permitted delay for surviving 

spouse beneficiaries. If the employee’s 

surviving spouse is the employee’s sole 

beneficiary, then the commencement of 

distributions under paragraph (b)(3) or 

(c)(4) of this section may be delayed 

until the end of the calendar year in 

which the employee would have 

attained age 72 (or the calendar year in 

which the employee would have 

attained age 701⁄2 in the case of an 

employee born before July 1, 1949). 

(e) Distributions that commence after 

surviving spouse’s death—(1) In general. 

If the employee’s surviving spouse is the 

employee’s sole beneficiary and dies 

after the employee, but before 

distributions have commenced under 

paragraph (d) of this section, then the 

5-year rule in paragraph (b)(2) or (c)(2) 

of this section, the 10-year rule in 

paragraph (c)(3) of this section, and the 

annuity payment rules in paragraph 

(b)(3) of this section or the life 

expectancy rules in paragraph (c)(4) of 

this section are to be applied as if the 

surviving spouse were the employee. 

For this purpose, the date of death of the 

surviving spouse is substituted for the 

date of death of the employee. 

(2) Remarriage of surviving spouse. If 

the delayed commencement in 

paragraph (d) of this section applies to 

the surviving spouse of the employee 

and the surviving spouse remarries but 

dies before distributions have begun, 

then the rules in paragraph (d) of this 

section are not available to the surviving 

spouse of the deceased employee’s 

surviving spouse. 

(3) When distributions are treated as 

having begun to surviving spouse. For 

purposes of section 401(a)(9)(B)(iv)(II), 

distributions are considered to have 

begun to the surviving spouse of an 

employee on the date, determined in 

accordance with paragraph (d) of this 

section, on which distributions are 

required to commence to the surviving 

spouse without regard to whether 

payments have actually been made 

before that date. However, see 

§ 1.401(a)(9)–6(l) for an exception to this 

rule in the case of an annuity that 

commences early. 

§ 1.401(a)(9)–4 Determination of the 

designated beneficiary. 

(a) Beneficiary designated under the 

plan—(1) In general. This section 

provides rules for purposes of 

determining the designated beneficiary 

under section 401(a)(9). For this 

purpose, a designated beneficiary is an 

individual who is a beneficiary 

designated under the plan. 

(2) Entitlement to employee’s interest 

in the plan. A beneficiary designated 

under the plan is a person who is 

entitled to a portion of an employee’s 

benefit, contingent on the employee’s 

death or another specified event. The 

determination of whether a beneficiary 

designated under the plan is taken into 

account for purposes of section 401(a)(9) 

is made in accordance with paragraph 

(c) of this section or, if applicable, 

paragraph (d) of this section. 

(3) Specificity of beneficiary 

designation. A beneficiary need not be 

specified by name in the plan or by the 

employee to the plan in order for the 

beneficiary to be designated under the 

plan, provided that the person who is to 

be the beneficiary is identifiable 

pursuant to the designation. For 

example, a designation of the 

employee’s children as beneficiaries of 

equal shares of the employee’s interest 

in the plan is treated as a designation of 

beneficiaries under the plan even if the 

children are not specified by name. The 

fact that an employee’s interest under 

the plan passes to a certain person 

under a will or otherwise under 

applicable state law does not make that 

person a beneficiary designated under 

the plan absent a designation under the 

plan. 

(4) Affirmative and default elections 

of designated beneficiary. A beneficiary 

designated under the plan may be 

designated by a default election under 

the terms of the plan or, if the plan so 

provides, by an affirmative election of 

the employee (or the employee’s 

surviving spouse). The choice of 

beneficiary is subject to the 

requirements of sections 401(a)(11), 

414(p), and 417. See §§ 1.401(a)(9)–8(d) 

and (e) for rules that apply to qualified 

domestic relations orders. 

(b) Designated beneficiary must be an 

individual. A person that is not an 

individual, such as the employee’s 

estate, is not a designated beneficiary. If 

a person other than an individual is a 

beneficiary designated under the plan, 

the employee will be treated as having 

no designated beneficiary, even if 

individuals are also designated as 

beneficiaries. However, see paragraph 

(f)(1) and (3) of this section for a rule 

under which certain beneficiaries of a 

see-through trust that is designated as 

the employee’s beneficiary under the 

plan are treated as the employee’s 

beneficiaries under the plan rather than 

the trust. In addition, the rules of this 

paragraph (b) do not apply to the extent 

separate account treatment applies in 

accordance with § 1.401(a)(9)–8(a). 

(c) Rules for determining 

beneficiaries—(1) Time period for 

determining the beneficiary. Except as 

provided in paragraphs (d) and (f) of 

this section and § 1.401(a)(9)–6(b)(2)(i), 

a person is a beneficiary taken into 

account for purposes of section 401(a)(9) 

if that person is a beneficiary designated 

under the plan as of the date of the 

employee’s death and none of the events 

described in paragraph (c)(2) of this 

section has occurred with respect to that 

person by September 30 of the calendar 

year following the calendar year of the 

employee’s death. 

(2) Circumstances under which a 

beneficiary is disregarded as a 

beneficiary of the employee. With 

respect to a beneficiary who was 

designated as a beneficiary under the 

plan as of the date of the employee’s 

death (including an individual who is 

treated as having been designated as a 

beneficiary pursuant to paragraph (f) of 

this section), if any of the following 

events occurs by September 30 of the 

calendar year following the calendar 

year of the employee’s death, then that 

beneficiary is not treated as a 

beneficiary— 

(i) The beneficiary predeceases the 

employee; 

(ii) The beneficiary is treated as 

having predeceased the employee 

pursuant to a simultaneous death 

provision under applicable State law or 

pursuant to a qualified disclaimer 

satisfying section 2518 that applies to 

the entire interest to which the 

beneficiary is entitled; or 

(iii) The beneficiary receives the 

entire benefit to which the beneficiary is 

entitled. 

(3) Examples. The following examples 

illustrate the rules of this paragraph (c). 

(i) Example 1. Employer M maintains 

a defined contribution plan, Plan X. 

Employee A dies in 2022 having 

designated A’s three children—B, C, and 

D—as beneficiaries, each with a onethird share of A’s interest in Plan X. B 

executes a disclaimer within 9 months 

of A’s death and the disclaimer satisfies 

the other requirements of a qualified 

disclaimer under section 2518. Pursuant 

to the qualified disclaimer, B is 

disregarded as a beneficiary. 

(ii) Example 2. The facts are the same 

as in Example 1 in paragraph (c)(3)(i) of 

this section except that B does not 

execute a disclaimer until 10 months 

after A’s death. Even if the disclaimer is 

executed by September 30 of the 

calendar year following the calendar 

year of A’s death, the disclaimer is not 

a qualified disclaimer (because B does 

not meet the 9-month requirement of 

section 2518) and B remains a 

designated beneficiary of A. 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10529 

(iii) Example 3. The facts are the same 

as in Example 1 in paragraph (c)(3)(i) of 

this section except that, in exchange for 

B’s disclaimer of the one-third share of 

A’s interest in Plan X, C transfers C’s 

interest in real property to B. Because B 

has received consideration for B’s 

disclaimer of the one-third share, it is 

not a qualified disclaimer under section 

2518 and B remains a designated 

beneficiary. 

(iv) Example 4. The facts are the same 

as in Example 1 in paragraph (c)(3)(i) of 

this section except that Charity E (an 

organization exempt from taxation 

under section 501(c)(3)) also is a 

beneficiary designated under the plan as 

of the date of A’s death, with B, C, D, 

and Charity E each having a one-fourth 

share of A’s interest in Plan X. Plan X 

distributes Charity E’s one-fourth share 

of A’s interest in the plan by September 

30 of the calendar year following the 

calendar year of A’s death. Accordingly, 

Charity E is disregarded as A’s 

beneficiary, and B, C, and D are treated 

as A’s designated beneficiaries. 

(v) Example 5. The facts are the same 

as in Example 1 in paragraph (c)(3)(i) of 

this section except that A’s spouse, F, 

also is a beneficiary designated under 

the plan. A and F were residents of State 

Z so that State Z law applies. The laws 

of State Z include a simultaneous death 

provision under which two individuals 

who die within a 120-hour period of one 

another are treated as predeceasing each 

other. F dies four hours after A and 

under the laws of State Z, F is treated 

as predeceasing A. Because, under 

applicable State law, F is treated as 

predeceasing A, F is disregarded as a 

beneficiary of A. 

(vi) Example 6. The facts are the same 

as in Example 1 in paragraph (c)(3)(i) of 

this section except that B, who was alive 

as of the date of A’s death, dies before 

September 30 of the calendar year 

following the calendar year of A’s death. 

Prior to B’s death, none of the events 

described in paragraph (c)(2) of this 

section occurred with respect to B. 

Accordingly, B is still a beneficiary 

taken into account for purposes of 

section 401(a)(9) regardless of the 

identity of B’s successor beneficiaries. 

(d) Application of beneficiary 

designation rules to surviving spouse. 

This paragraph (d) applies in the case of 

distributions to which § 1.401(a)(9)–3(e) 

applies (because the employee’s spouse 

is the employee’s sole beneficiary as of 

September 30 of the calendar year 

following the calendar year of the 

employee’s death, and the surviving 

spouse dies before distributions to the 

spouse have begun). If this paragraph (d) 

applies, then the determination of 

whether a person is a beneficiary of the 

surviving spouse is made using the rules 

of paragraph (c) of this section, except 

that the date of the surviving spouse’s 

death is substituted for the date of the 

employee’s death. Thus, a person is a 

beneficiary if that person is a 

beneficiary designated under the plan as 

of the date of the surviving spouse’s 

death and remains a beneficiary as of 

September 30 of the calendar year 

following the calendar year of the 

surviving spouse’s death. 

(e) Eligible designated beneficiaries— 

(1) In general. A designated beneficiary 

of the employee is an eligible designated 

beneficiary if, at the time of the 

employee’s death, the designated 

beneficiary is— 

(i) The surviving spouse of the 

employee; 

(ii) A child of the employee who has 

not reached the age of majority within 

the meaning of paragraph (e)(3) of this 

section; 

(iii) Disabled within the meaning of 

paragraph (e)(4) of this section; 

(iv) Chronically ill within the 

meaning of paragraph (e)(5) of this 

section; 

(v) Not more than 10 years younger 

than the employee as determined under 

paragraph (e)(6) of this section; or 

(vi) A designated beneficiary of an 

employee if the employee died before 

the effective date of section 401(a)(9)(H) 

described in § 1.401(a)(9)–1(b)(2)(i) and 

(ii), whichever applies to the plan. 

(2) Multiple designated 

beneficiaries—(i) In general. Except as 

provided in paragraphs (e)(2)(ii) of this 

section (providing a special rule for 

children), (g)(3)(ii) of this section 

(relating to applicable multi-beneficiary 

trusts), and § 1.401(a)(9)–8(a) (relating to 

separate account treatment), if the 

employee has more than one designated 

beneficiary, and at least one of those 

beneficiaries is not an eligible 

designated beneficiary as determined in 

accordance with paragraph (e)(1) of this 

section, then the employee is treated as 

not having an eligible designated 

beneficiary. 

(ii) Special rule for children. If any of 

the employee’s designated beneficiaries 

is an eligible designated beneficiary 

because the beneficiary is the child of 

the employee who had not reached the 

age of majority at the time of the 

employee’s death, then the employee is 

treated as having an eligible designated 

beneficiary even if the employee has 

other designated beneficiaries who are 

not eligible designated beneficiaries. 

(3) Determination of age of majority. 

An individual reaches the age of 

majority on the individual’s 21st 

birthday. 

(4) Disabled individual—(i) In 

general. Subject to the documentation 

requirements of paragraph (e)(7) of this 

section, an individual is disabled if, as 

of the date of the employee’s death, the 

individual is described in paragraph 

(e)(4)(ii) or (iii) of this section, or 

paragraph (e)(4)(iv) of this section 

applies. 

(ii) Disability defined for individual 

who is age 18 or older. An individual 

who, as of the date of the employee’s 

death, is age 18 or older is disabled if, 

as of that date, the individual is unable 

to engage in any substantial gainful 

activity by reason of any medically 

determinable physical or mental 

impairment that can be expected to 

result in death or to be of longcontinued and indefinite duration. 

(iii) Disability defined for individual 

who is not age 18 or older. An 

individual who, as of the date of the 

employee’s death, is not age 18 or older 

is disabled if, as of that date, that 

individual has a medically determinable 

physical or mental impairment that 

results in marked and severe functional 

limitations and that can be expected to 

result in death or to be of longcontinued and indefinite duration. 

(iv) Use of social security disability 

determination. If the Commissioner of 

Social Security has determined that, as 

of the date of the employee’s death, an 

individual is disabled within the 

meaning of 42 U.S.C. 1382c(a)(3), then 

that individual will be deemed to be 

disabled within the meaning of this 

paragraph (e)(4). 

(5) Chronically ill individual. An 

individual is chronically ill if the 

individual is chronically ill within the 

definition of section 7702B(c)(2) and 

satisfies the documentation 

requirements of paragraph (e)(7) of this 

paragraph. However, for purposes of the 

preceding sentence, an individual will 

be treated as chronically ill under 

section 7702B(c)(2)(A)(i) only if there is 

a certification from a licensed health 

care practitioner (as that term is defined 

in section 7702B(c)(4)) that, as of the 

date of the certification, the individual 

is unable to perform (without 

substantial assistance from another 

individual) at least 2 activities of daily 

living for an indefinite period which is 

reasonably expected to be lengthy in 

nature (and not merely for 90 days). 

(6) Individual not more than 10 years 

younger than the employee. Whether a 

designated beneficiary is not more than 

10 years younger than the employee is 

determined based on the dates of birth 

of the employee and the beneficiary. 

Thus, for example, if an employee’s date 

of birth is October 1, 1953, then the 

employee’s beneficiary is not more than 


jspears on DSK121TN23PROD with PROPOSALS3
10530 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

10 years younger than the employee if 

the beneficiary was born on or before 

October 1, 1963. 

(7) Documentation requirements for 

disabled or chronically ill individuals. 

This paragraph (e)(7) is satisfied with 

respect to an individual described in 

paragraph (e)(1)(iii) or (iv) of this 

section if documentation of the 

disability or chronic illness described in 

paragraph (e)(4) or (5) of this section, 

respectively, is provided to the plan 

administrator no later than October 31 

of the calendar year following the 

calendar year of the employee’s death. 

For individuals described in paragraph 

(e)(1)(iv) of this section, the 

documentation must include a 

certification from a licensed health care 

practitioner (as that term is defined in 

section 7702B(c)(4)). 

(8) Applicability of definition of 

eligible designated beneficiary to 

beneficiary of surviving spouse. In a 

case to which § 1.401(a)(9)–3(d) applies 

(generally involving distributions after a 

surviving spouse’s death), a designated 

beneficiary of the employee’s surviving 

spouse is an eligible designated 

beneficiary provided that designated 

beneficiary would be an eligible 

designated beneficiary described in 

paragraph (e)(1) of this section if that 

paragraph were to be applied by 

substituting the surviving spouse for the 

employee. 

(9) Examples. The following examples 

illustrate the rules of this paragraph (e). 

(i) Example 1. Employer M maintains 

a defined contribution plan, Plan X. 

Employee A designates A’s child, B, as 

the sole beneficiary of A’s interest in 

Plan X. B will not reach the age of 

majority until 2024. A dies in 2022, after 

A’s required beginning date. As of the 

date of A’s death, B is disabled within 

the meaning of paragraph (e)(4) of this 

section, and the documentation 

requirements of paragraph (e)(7) of this 

section are timely satisfied with respect 

to B. Due to B’s disability, B remains an 

eligible designated beneficiary even 

after reaching the age of majority in 

2024, and Plan X is not required to 

distribute A’s remaining interest in the 

plan by the end of 2034 pursuant to the 

rules of § 1.401(a)(9)–5(e)(4), but instead 

may continue life expectancy payments 

to B during B’s lifetime. 

(ii) Example 2. The facts are the same 

as in Example 1 in paragraph (e)(9)(i) of 

this section except that the 

documentation requirements of 

paragraph (e)(7) of this section are not 

timely satisfied with respect to B. B 

ceases to be an eligible designated 

beneficiary upon reaching the age of 

majority in 2024, and Plan X is required 

to distribute A’s remaining interest in 

the plan by the end of 2034 pursuant to 

the rules of § 1.401(a)(9)–5(e)(4). 

(iii) Example 3. The facts are the same 

as in Example 1 in paragraph (e)(9)(i) of 

this section except that B becomes 

disabled in 2023 (after A’s death in 

2022). Because B was not disabled as of 

the date of A’s death, B ceases to be an 

eligible designated beneficiary upon 

reaching the age of majority in 2024, 

and Plan X is required to distribute A’s 

remaining interest in the plan by the 

end of 2034 pursuant to the rules of 

§ 1.401(a)(9)–5(e)(4). 

(f) Special rules for trusts—(1) Lookthrough of trust to determine designated 

beneficiaries—(i) In general. If the 

requirements of paragraph (f)(2) of this 

section are met with respect to a trust 

that is designated as the beneficiary of 

an employee under a plan, then certain 

beneficiaries of the trust that are 

described in paragraph (f)(3) of this 

section (and not the trust itself) are 

treated as having been designated as 

beneficiaries of the employee under the 

plan, provided that those beneficiaries 

are not disregarded under paragraph 

(c)(2) of this section. A trust described 

in the preceding sentence is referred to 

as a see-through trust. 

(ii) Types of trusts. The determination 

of which beneficiaries of a see-through 

trust are treated as having been 

designated as beneficiaries of the 

employee under the plan depends on 

whether the see-through trust is a 

conduit trust or an accumulation trust. 

For this purpose— 

(A) The term conduit trust means a 

see-through trust, the terms of which 

provide that, with respect to the 

deceased employee’s interest in the 

plan, all distributions will, upon receipt 

by the trustee, be paid directly to, or for 

the benefit of, specified beneficiaries; 

and 

(B) The term accumulation trust 

means any see-through trust that is not 

a conduit trust. 

(2) Trust requirements. The 

requirements of this paragraph (f)(2) are 

met if, during any period for which 

required minimum distributions are 

being determined by treating the 

beneficiaries of the trust as having been 

designated as beneficiaries of the 

employee under the plan, the following 

requirements are met— 

(i) The trust is a valid trust under state 

law or would be but for the fact that 

there is no corpus. 

(ii) The trust is irrevocable or will, by 

its terms, become irrevocable upon the 

death of the employee. 

(iii) The beneficiaries of the trust who 

are beneficiaries with respect to the 

trust’s interest in the employee’s interest 

in the plan are identifiable (within the 

meaning of paragraph (f)(5) of this 

section) from the trust instrument. 

(iv) The documentation requirements 

in paragraph (h) of this section have 

been satisfied. 

(3) Trust beneficiaries treated as 

beneficiaries of the employee—(i) In 

general. Subject to the rules of 

paragraphs (f)(3)(ii) and (iii) of this 

section, the following beneficiaries of a 

see-through trust are treated as having 

been designated as beneficiaries of the 

employee under the plan— 

(A) Any beneficiary who could 

receive amounts in the trust 

representing the employee’s interest in 

the plan that are neither contingent 

upon, nor delayed until, the death of 

another trust beneficiary who did not 

predecease (and is not treated as having 

predeceased) the employee; and 

(B) Any beneficiary of an 

accumulation trust that could receive 

amounts in the trust representing the 

employee’s interest in the plan that 

were not distributed to beneficiaries 

described in paragraph (f)(3)(i)(A) of this 

section. 

(ii) Certain trust beneficiaries 

disregarded—(A) Entitlement 

conditioned on death of secondary 

beneficiary. Any beneficiary of an 

accumulation trust who could receive 

amounts from the trust that represent 

the employee’s interest in the plan 

solely because of the death of another 

beneficiary described in paragraph 

(f)(3)(i)(B) of this section is not treated 

as having been designated as a 

beneficiary of the employee under the 

plan. The preceding sentence does not 

apply if the other beneficiary described 

in paragraph (f)(3)(i)(B) of this section— 

(1) Predeceased (or is treated as 

having predeceased) the employee; or 

(2) Also is described in paragraph 

(f)(3)(i)(A) of this section. 

(B) Entitlement conditioned on death 

of young individual. If any beneficiary 

of a see-through trust is an individual 

who is treated as a beneficiary of the 

employee under paragraph (f)(3)(i)(A) of 

this section, and the terms of the trust 

require full distribution of amounts in 

the trust representing the employee’s 

interest in the plan to that individual by 

the later of the end of the calendar year 

following the calendar year of the 

employee’s death and the end of the 

tenth calendar year following the 

calendar year in which that individual 

attains the age of majority (within the 

meaning of paragraph (e)(3) of this 

section), then any other beneficiary of 

the trust who could receive amounts in 

the trust representing the employee’s 

interest in the plan if that individual 

dies before full distribution to that 

individual is made is not treated as 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10531 

having been designated as a beneficiary 

of the employee under the plan. The 

preceding sentence does not apply if the 

beneficiary who could receive amounts 

in the trust conditioned on the death of 

that individual also is described in 

paragraph (f)(3)(i)(A) of this section. 

(iii) Certain accumulations 

disregarded. For purposes of this 

paragraph (f)(3), a trust will not fail to 

be treated as a conduit trust merely 

because the trust terms requiring the 

direct payment of amounts received 

from the plan do not apply after the 

death of all of the beneficiaries 

described in paragraph (f)(3)(i)(A) of this 

section. 

(4) Multiple trust arrangements. If a 

beneficiary of a see-through trust is 

another trust, the beneficiaries of the 

second trust will be treated as 

beneficiaries of the first trust, provided 

that the requirements of paragraph (f)(2) 

of this section are satisfied with respect 

to the second trust. In that case, the 

beneficiaries of the second trust are 

treated as having been designated as 

beneficiaries of the employee under the 

plan. 

(5) Identifiability of trust 

beneficiaries—(i) In general. Except as 

otherwise provided in this paragraph 

(f)(5), trust beneficiaries described in 

paragraph (f)(3) of this section are 

identifiable if it is possible to identify 

each person eligible to receive a portion 

of the employee’s interest in the plan 

through the trust. For this purpose, the 

specificity requirements of paragraph 

(a)(3) of this section apply. 

(ii) Power of appointment—(A) 

Exercise or release of power of 

appointment by September 30. A trust 

does not fail to satisfy the identifiability 

requirements of this paragraph (f)(5) 

merely because an individual 

(powerholder) has the power to appoint 

a portion of the employee’s interest to 

one or more beneficiaries that are not 

identifiable within the meaning of 

paragraph (f)(5)(i) of this section. If the 

power of appointment is exercised in 

favor of one or more identifiable 

beneficiaries by September 30 of the 

calendar year following the calendar 

year of the employee’s death, then those 

identifiable beneficiaries are treated as 

beneficiaries designated under the plan. 

The preceding sentence also applies if, 

by that September 30, in lieu of 

exercising the power of appointment, 

the powerholder restricts it so that the 

power can be exercised at a later time 

in favor of only two or more identifiable 

beneficiaries (in which case, those 

identified beneficiaries are treated as 

beneficiaries designated under the 

plan). However, if, by that September 

30, the power of appointment is not 

exercised (or restricted) in favor of one 

or more beneficiaries that are 

identifiable within the meaning of 

paragraph (f)(5)(i) of this section, then 

each taker in default (that is, any person 

that is entitled to the portion that 

represents the employee’s interest in the 

plan subject to the power of 

appointment in the absence of the 

powerholder exercising the power) is 

treated as a beneficiary designated 

under the plan. 

(B) Exercise of power of appointment 

after September 30 of the calendar year 

following the calendar year of the 

employee’s death. If an individual has a 

power of appointment to appoint a 

portion of the employee’s interest to one 

or more beneficiaries and the individual 

exercises the power of appointment 

after September 30 of the calendar year 

following the calendar year of the 

employee’s death, then the rules of 

paragraph (f)(5)(iv) of this section apply 

with respect to any trust beneficiary that 

is added pursuant to the exercise of the 

power of appointment. 

(iii) Modification of trust terms—(A) 

State law will not cause trust to fail to 

satisfy identifiability requirement. A 

trust will not fail to satisfy the 

identifiability requirements of this 

paragraph (f)(5) merely because the trust 

is subject to state law that permits the 

trust terms to be modified after the 

death of the employee (such as through 

a court reformation or a permitted 

decanting) and thus, permits changing 

the beneficiaries of the trust. 

(B) Modification of trust to remove 

trust beneficiaries. A trust beneficiary 

described in paragraph (f)(3) of this 

section may be removed pursuant to a 

modification of trust terms (such as 

through a court reformation or a 

permitted decanting) by September 30 

of the calendar year following the 

calendar year of the employee’s death, 

in which case that person is disregarded 

in determining the employee’s 

designated beneficiary. 

(C) Modification of trust to add trust 

beneficiaries. A trust beneficiary 

described in paragraph (f)(3) of this 

section may be added through a 

modification of trust terms (such as 

through a court reformation or a 

permitted decanting). If the beneficiary 

is added on or before September 30 of 

the calendar year following the calendar 

year of the employee’s death, paragraph 

(c) of this section will apply taking into 

account the beneficiary that was added. 

If the beneficiary is added after that 

September 30, then the rules of 

paragraph (f)(5)(iv) of this section will 

apply with respect to the beneficiary 

that is added. 

(iv) Addition of beneficiary after 

September 30. If, after September 30 of 

the calendar year following the calendar 

year of the employee’s death, a trust 

beneficiary described in paragraph (f)(3) 

of this section is added as a trust 

beneficiary (whether through the 

exercise of a power of appointment, the 

modification of trust terms, or 

otherwise), then— 

(A) The addition of the beneficiary 

will not cause the trust to fail to satisfy 

the identifiability requirements of this 

paragraph (f)(5); 

(B) Beginning in the calendar year 

after the calendar year in which the new 

trust beneficiary was added, the rules of 

§ 1.401(a)(9)–5(f)(1) will apply taking 

into account the new beneficiary and all 

of the beneficiaries of the trust that were 

treated as beneficiaries of the employee 

before the addition of the new 

beneficiary; and 

(C) Subject to paragraph (f)(5)(v) of 

this section, the rules of paragraphs (b) 

and (e)(2) of this section and 

§ 1.401(a)(9)–5(f)(2) will apply taking 

into account the new beneficiary and all 

of the beneficiaries of the trust that were 

treated as beneficiaries of the employee 

before the addition of the new 

beneficiary. 

(v) Delay in full distribution 

requirement. This paragraph (f)(5)(v) 

provides a special rule that applies if a 

full distribution of the employee’s entire 

interest in the plan is not required in a 

calendar year pursuant to § 1.401(a)(9)– 

5(e), but a beneficiary is added in that 

calendar year. In that case, if, taking into 

account the added beneficiary pursuant 

to paragraph (f)(5)(iv)(C) of this section, 

a full distribution of the employee’s 

entire interest in the plan would have 

been required in that calendar year or an 

earlier calendar year, then a full 

distribution of the employee’s entire 

interest in the plan will not be required 

until the end of the calendar year after 

the calendar year in which the 

beneficiary is added. For example, if life 

expectancy payments are being made to 

an eligible designated beneficiary and, 

more than 10 years after the employee’s 

death, a beneficiary is added who is not 

an eligible designated beneficiary as 

described in paragraph (e) of this 

section, then the employee is treated as 

not having an eligible designated 

beneficiary for purposes of 

§ 1.401(a)(9)–5(e)(2) (so that a full 

distribution of the employee’s entire 

interest in the plan would have been 

required within 10 years of the 

employee’s death). However, pursuant 

to this paragraph (f)(5)(v), the full 

distribution of the employee’s entire 

interest in the plan is not required until 

the end of the calendar year following 


jspears on DSK121TN23PROD with PROPOSALS3
10532 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

the calendar year in which the new trust 

beneficiary was added. 

(6) Examples. The following examples 

illustrate the see-through trust rules of 

this paragraph (f). 

(i) Example 1—(A) Facts. Employer L 

maintains a defined contribution plan, 

Plan W. Unmarried Employee C died in 

2022 at age 30. Prior to C’s death, C 

named a testamentary trust (Trust T) 

that satisfies the requirements of 

paragraph (f)(2) of this section, as the 

beneficiary of C’s interest in Plan W. 

The terms of Trust T require that all 

distributions received from Plan W, 

upon receipt by the trustee, be paid 

directly to D, C’s sibling, who is 5 years 

older than C. The terms of Trust T also 

provide that, if D dies before C’s entire 

account balance has been distributed to 

D, E, will be the beneficiary of C’s 

remaining account balance. 

(B) Analysis. Pursuant to paragraph 

(f)(1)(ii)(A) of this section, Trust T is a 

conduit trust. Because Trust T is a 

conduit trust (meaning the residual 

beneficiary rule in paragraph (f)(3)(i)(B) 

of this section does not apply) and 

because E is only entitled to any portion 

of C’s account if D dies before the entire 

account has been distributed, E is 

disregarded in determining C’s 

designated beneficiary. Because D is an 

eligible designated beneficiary, D may 

use the life expectancy rule of 

§ 1.401(a)(9)–3(c)(4). Accordingly, even 

if D dies before C’s entire interest in 

Plan W is distributed to Trust T, D’s life 

expectancy continues to be used to 

determine the applicable denominator. 

Note, however, that because 

§ 1.401(a)(9)–5(e) applies in this 

situation, a distribution of C’s entire 

interest in Plan W will be required no 

later than 10 years after the calendar 

year in which D dies. 

(ii) Example 2—(A) Facts related to 

plan and beneficiary. Employer M 

maintains a defined contribution plan, 

Plan X. Employee A, an employee of M, 

died in 2022 at the age of 55, survived 

by Spouse B, who was 50 years old. A’s 

account balance in Plan X is invested 

only in productive assets and was 

includible in A’s gross estate under 

section 2039. A named a testamentary 

trust (Trust P) as the beneficiary of all 

amounts payable from A’s account in 

Plan X after A’s death. Trust P satisfies 

the see-through trust requirements of 

paragraph (f)(2) of this section. 

(B) Facts related to trust. Under the 

terms of Trust P, all trust income is 

payable annually to B, and no one has 

the power to appoint Trust P principal 

to any person other than B. A’s sibling, 

who is less than 10 years younger than 

A (and thus is an eligible designated 

beneficiary) and is younger than B, is 

the sole residual beneficiary of Trust P. 

Also, under the terms of Trust P, if A’s 

sibling predeceases B, then, upon B’s 

death, all Trust P principal is 

distributed to Charity Z (an organization 

exempt from tax under section 

501(c)(3)). No other person has a 

beneficial interest in Trust P. Under the 

terms of Trust P, B has the power, 

exercisable annually, to compel the 

trustee to withdraw from A’s account 

balance in Plan X an amount equal to 

the income earned during the calendar 

year on the assets held in A’s account 

in Plan X and to distribute that amount 

through Trust P to B. Plan X includes no 

prohibition on withdrawal from A’s 

account of amounts in excess of the 

annual required minimum distributions 

under section 401(a)(9). In accordance 

with the terms of Plan X, the trustee of 

Trust P elects to take annual life 

expectancy payments pursuant to 

section 401(a)(9)(B)(iii). If B exercises 

the withdrawal power, the trustee must 

withdraw from A’s account under Plan 

X the greater of the amount of income 

earned in the account during the 

calendar year or the required minimum 

distribution. However, under the terms 

of Trust P, and applicable state law, 

only the portion of the Plan X 

distribution received by the trustee 

equal to the income earned by A’s 

account in Plan X is required to be 

distributed to B (along with any other 

trust income). 

(C) Analysis. Because some amounts 

distributed from A’s account in Plan X 

to Trust P may be accumulated in Trust 

P during B’s lifetime, Trust P is an 

accumulation trust. Pursuant to 

paragraph (f)(3)(i)(B) of this section, A’s 

sibling, as the residual beneficiary of 

Trust P, is treated as a beneficiary 

designated under Plan X (even though 

access to those amounts is delayed until 

after B’s death). Pursuant to paragraph 

(f)(2)(iii)(A) of this section, because 

Charity Z’s entitlement to amounts in 

the trust is based on the death of a 

beneficiary described in paragraph 

(f)(3)(i)(B) of this section, Charity Z is 

disregarded as a beneficiary of A. Under 

§ 1.401(a)(9)–5(f)(1), the designated 

beneficiary used to determine the 

applicable denominator is the oldest of 

the designated beneficiaries of Trust P’s 

interest in Plan X. B is the oldest of the 

beneficiaries of Trust P’s interest in Plan 

X (including residual beneficiaries). 

Thus, the applicable denominator for 

purposes of section 401(a)(9)(B)(iii) is 

B’s life expectancy. Because A’s sibling 

is a beneficiary of A’s account in Plan 

X in addition to B, B is not the sole 

beneficiary of A’s account and the 

special rule in section 401(a)(9)(B)(iv) 

and § 1.401(a)(9)–3(d) is not available. 

Accordingly, the annual required 

minimum distributions from the 

account to Trust P must begin no later 

than the end of the calendar year 

immediately following the calendar year 

of A’s death. 

(iii) Example 3—(A) Facts. The facts 

are the same as in Example 2 in 

paragraph (f)(6)(ii) of this section except 

that A’s sibling is more than 10 years 

younger than A, meaning that at least 

one of the beneficiaries of Trust P’s 

interest in Plan X is not an eligible 

designated beneficiary. 

(B) Analysis. Pursuant to paragraph 

(e)(2)(i) of this section, A is treated as 

not having an eligible designated 

beneficiary. Pursuant to § 1.401(a)(9)– 

3(c)(5), the trustee of Trust P is not 

permitted to make an election to take 

annual life expectancy distributions and 

the 10-year rule of § 1.401(a)(9)–3(c)(3) 

applies. 

(iv) Example 4—(A) Facts related to 

plan and beneficiary. Employer N 

maintains a defined contribution plan, 

Plan Y. Employee F, an employee of N, 

died in 2022 at the age of 60. F named 

a testamentary trust (Trust Q), which 

was established under F’s will, as the 

beneficiary of all amounts payable from 

F’s account in Plan X after F’s death. 

Trust Q satisfies the see-through trust 

requirements of paragraph (f)(2) of this 

section. 

(B) Facts related to trust. Under the 

terms of Trust Q, all trust income is 

payable to F’s surviving spouse, G, and 

G has a power of appointment to name 

the beneficiaries of the residual in Trust 

Q. The power of appointment provides 

that, if G does not exercise the power, 

then upon G’s death, F’s descendants 

are entitled to the remainder interest in 

Trust Q, per stirpes. As of the date of F’s 

death, F has two children, K and L, who 

are not disabled or chronically ill and 

who are both older than age 21. Before 

September 30 of the calendar year 

following the calendar year in which F 

died, G irrevocably restricts G’s power 

of appointment so that G may exercise 

the power to appoint the remainder 

beneficiaries of Trust Q only in favor of 

G’s siblings (who all are less than 10 

years younger than F and thus, are 

eligible designated beneficiaries). 

(C) Analysis. Pursuant to paragraph 

(f)(5)(ii)(A) of this section, because G 

timely restricted the power of 

appointment so that G may exercise the 

power to appoint the residual interest in 

Trust Q only in favor of G’s siblings, the 

designated beneficiaries are G and G’s 

siblings. Because all of the designated 

beneficiaries are eligible designated 

beneficiaries, annual life expectancy 

payments are permitted under section 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10533 

401(a)(9)(B)(iii). Note, however, that 

because § 1.401(a)(9)–5(e) applies, a 

distribution of the remaining interest is 

required by no later than 10 years after 

the calendar year in which the oldest of 

G and G’s siblings dies. 

(v) Example 5—(A) Facts. The facts 

are the same as in Example 4 in 

paragraph (f)(6)(iv) of this section except 

that G does not restrict the power by 

September 30 of the calendar year 

following the calendar year of F’s death. 

(B) Analysis. Pursuant to paragraph 

(f)(5)(ii)(A) of this section, G, K, and L 

are treated as F’s beneficiaries. Pursuant 

to § 1.401(a)(9)–3(c)(5), because K and L 

are not eligible designated beneficiaries, 

the trustee of Trust Q is not permitted 

to make an election to take annual life 

expectancy distributions, and the 10- 

year rule of § 1.401(a)(9)–3(c)(3) applies. 

(g) Applicable multi-beneficiary 

trusts—(1) General definition of an 

applicable multi-beneficiary trust. An 

applicable multi-beneficiary trust is a 

see-through trust with more than one 

beneficiary and with respect to which— 

(i) All of the trust beneficiaries are 

designated beneficiaries; and 

(ii) At least one of the trust 

beneficiaries is an eligible designated 

beneficiary who is disabled (as defined 

in paragraph (e)(1)(iii) of this section) or 

chronically ill (as defined in paragraph 

(e)(1)(iv) of this section). 

(2) Type I applicable multi-beneficiary 

trust. An applicable multi-beneficiary 

trust is a type I applicable multibeneficiary trust if the terms of the trust 

provide that it is to be divided 

immediately upon the death of the 

employee into separate trusts for each 

beneficiary. 

(3) Type II applicable multibeneficiary trust—(i) General definition. 

An applicable multi-beneficiary trust is 

a type II applicable multi-beneficiary 

trust if— 

(A) The trust terms identify one or 

more individuals, each of whom is 

disabled (as defined in paragraph 

(e)(1)(iii) of this section) or chronically 

ill (as defined in paragraph (e)(1)(iv) of 

this section), who are entitled to 

benefits during their lifetime; and 

(B) The terms of the trust provide that 

no individual (other than an individual 

described in paragraph (g)(3)(i)(A) of 

this section) has any right to the 

employee’s interest in the plan until the 

death of all of the eligible designated 

beneficiaries described in paragraph 

(g)(3)(i)(A) with respect to the trust. 

(ii) Special rule for type II applicable 

multi-beneficiary trusts. If an 

employee’s beneficiary is a type II 

applicable multi-beneficiary trust 

described in paragraph (g)(3)(i) of this 

section, then the beneficiaries of the 

trust described in paragraph (g)(3)(i)(A) 

of this section are treated as eligible 

designated beneficiaries without regard 

to whether any of the other trust 

beneficiaries are not eligible designated 

beneficiaries. 

(h) Documentation requirements for 

trusts—(1) General rule. The 

documentation requirements of this 

paragraph (h) are satisfied if— 

(i) In the case of required minimum 

distributions while the employee is still 

alive, paragraph (h)(2) of this section is 

satisfied; or 

(ii) In the case of required minimum 

distributions after the employee has 

died, or after the employee’s surviving 

spouse has died in a case to which 

§ 1.401(a)(9)–3(d) applies, paragraph 

(h)(3) of this section is satisfied. 

(2) Required minimum distributions 

while employee is still alive—(i) In 

general. If an employee designates a 

trust as the beneficiary of the 

employee’s entire benefit and the 

employee’s spouse is the only 

beneficiary of the trust treated as a 

beneficiary of the employee pursuant to 

the rules of paragraph (f) of this section, 

then, in order to satisfy the 

documentation requirements of this 

paragraph (h)(2) (so that the applicable 

denominator for a distribution calendar 

year may be determined under the rules 

of § 1.401(a)(9)–35(c)(2), assuming the 

other requirements of paragraph (f)(2) of 

this section are satisfied), before the first 

day of the distribution calendar year the 

employee must either satisfy the 

requirements of paragraph (h)(2)(ii) of 

this section (requiring the employee to 

provide a copy of the trust instrument) 

or the requirements of paragraph 

(h)(2)(iii) of this section (requiring the 

employee to provide a list of 

beneficiaries). 

(ii) Employee to provide copy of trust 

instrument. An employee satisfies the 

requirements of this paragraph (h)(2)(ii) 

if the employee— 

(A) Provides to the plan administrator 

a copy of the trust instrument; and 

(B) Agrees that, if the trust instrument 

is amended at any time in the future, the 

employee will, within a reasonable 

time, provide to the plan administrator 

a copy of each amendment. 

(iii) Employee to provide list of 

beneficiaries. An employee satisfies the 

requirements of this paragraph (h)(2)(iii) 

if the employee— 

(A) Provides to the plan administrator 

a list of all of the beneficiaries of the 

trust (including contingent 

beneficiaries) with a description of the 

conditions on their entitlement 

sufficient to establish whether the 

spouse is the sole beneficiary; 

(B) Certifies that, to the best of the 

employee’s knowledge, the list 

described in paragraph (h)(2)(iii)(A) of 

this section is correct and complete and 

that the requirements of paragraph 

(f)(2)(i), (ii), and (iii) of this section are 

satisfied; and 

(C) Agrees that, if the trust instrument 

is amended at any time in the future, the 

employee will, within a reasonable 

time, provide to the plan administrator 

corrected certifications to the extent that 

the amendment changes any 

information previously certified; and 

(D) Agrees to provide a copy of the 

trust instrument to the plan 

administrator upon request. 

(3) Required minimum distributions 

after death—(i) In general. In order to 

satisfy the documentation requirement 

of this paragraph (h)(3) for required 

minimum distributions after the death 

of the employee (or after the death of the 

employee’s surviving spouse in a case to 

which § 1.401(a)(9)–3(d) applies), by 

October 31 of the calendar year 

immediately following the calendar year 

in which the employee died or, in a case 

to which § 1.401(a)(9)–3(d) applies, the 

employee’s surviving spouse died, the 

trustee of the trust must satisfy the 

requirements of either paragraph 

(h)(3)(ii) (requiring the trustee to 

provide a list of beneficiaries) or 

paragraph (h)(3)(iii) of this section 

(requiring the trustee to provide a copy 

of the trust instrument). 

(ii) Trustee to provide list of 

beneficiaries. A trustee satisfies the 

requirements of this paragraph (h)(3)(ii) 

if the trustee— 

(A) Provides the plan administrator 

with a final list of all beneficiaries of the 

trust as of September 30 of the calendar 

year following the calendar year of the 

death (including contingent 

beneficiaries) with a description of the 

conditions on their entitlement 

sufficient to establish who are the 

beneficiaries; 

(B) Certifies that, to the best of the 

trustee’s knowledge, this list is correct 

and complete and that the requirements 

of paragraph (f)(2)(i), (ii), and (iii) of this 

section are satisfied; and 

(C) Agrees to provide a copy of the 

trust instrument to the plan 

administrator upon request. 

(iii) Trustee to provide copy of trust 

instrument. A trustee satisfies the 

requirements of this paragraph (h)(3)(iii) 

if the trustee provides the plan 

administrator with a copy of the actual 

trust document for the trust that is 

named as a beneficiary of the employee 

under the plan as of the employee’s date 

of death. 

(4) Relief for discrepancy between 

trust instrument and employee 


jspears on DSK121TN23PROD with PROPOSALS3
10534 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

certifications or earlier trust 

instruments—(i) In general. If required 

minimum distributions are determined 

based on the information provided to 

the plan administrator in certifications 

or trust instruments described in 

paragraph (h)(2) or (3) of this section, a 

plan will not fail to satisfy section 

401(a)(9) merely because the actual 

terms of the trust instrument are 

inconsistent with the information in 

those certifications or trust instruments 

previously provided to the plan 

administrator, but only if— 

(A) The plan administrator reasonably 

relied on the information provided; and 

(B) The required minimum 

distributions for calendar years after the 

calendar year in which the discrepancy 

is discovered are determined based on 

the actual terms of the trust instrument. 

(ii) Excise tax. For purposes of 

determining the amount of the excise 

tax under section 4974, the required 

minimum distribution is determined for 

any year based on the actual terms of 

the trust in effect during the year. 

§ 1.401(a)(9)–5 Required minimum 

distributions from defined contribution 

plans. 

(a) General rules—(1) In general. 

Subject to the rules of paragraph (e) of 

this section (requiring distribution of an 

employee’s entire interest by a specified 

deadline in certain situations), if an 

employee’s accrued benefit is in the 

form of an individual account under a 

defined contribution plan, the minimum 

amount required to be distributed for 

each distribution calendar year (as 

defined in paragraph (a)(2) of this 

section) is equal to the quotient 

obtained by dividing the account 

balance (determined under paragraph 

(b) of this section) by the applicable 

denominator (determined under 

paragraph (c) or (d) of this section, 

whichever is applicable). However, the 

required minimum distribution amount 

will never exceed the entire account 

balance on the date of the distribution. 

See paragraph (g) of this section for 

rules that apply if a portion of the 

employee’s account is not vested. 

(2) Distribution calendar year—(i) In 

general. A calendar year for which a 

minimum distribution is required is a 

distribution calendar year. 

(ii) First distribution calendar year for 

employee. If an employee’s required 

beginning date is April 1 of the calendar 

year following the calendar year in 

which the employee attains age 72, then 

the employee’s first distribution 

calendar year is the year the employee 

attains age 72. If an employee’s required 

beginning date is April 1 of the calendar 

year following the calendar year in 

which the employee retires, the 

employee’s first distribution calendar 

year is the calendar year in which the 

employee retires. 

(iii) First distribution calendar year 

for beneficiary. In the case of an 

employee who dies before the required 

beginning date, if the life expectancy 

rule in § 1.401(a)(9)–3(c)(4) applies, then 

the first distribution calendar year for 

the designated beneficiary is the 

calendar year after the calendar year in 

which the employee died (or, if 

applicable, the calendar year described 

in § 1.401(a)(9)–3(d)). See § 1.401(a)(9)– 

3(c)(5) to determine whether the life 

expectancy rule in § 1.401(a)(9)–3(c)(4) 

applies. 

(3) Time for distributions. The 

distribution required for the employee’s 

first distribution calendar year (as 

described in paragraph (a)(2)(ii) of this 

section) may be made on or before April 

1 of the following calendar year. The 

required minimum distribution for any 

other distribution calendar year 

(including the required minimum 

distribution for the distribution calendar 

year in which the employee’s required 

beginning date occurs or the first 

distribution calendar year for the 

designated beneficiary) must be made 

on or before the end of that distribution 

calendar year. 

(4) Minimum distribution incidental 

benefit requirement. If distributions of 

an employee’s account balance under a 

defined contribution plan are made in 

accordance with this section— 

(i) With respect to the retirement 

benefits provided by that account 

balance, to the extent the incidental 

benefit requirement of § 1.401–1(b)(1)(i) 

requires distributions, that requirement 

is deemed satisfied; and 

(ii) No additional distributions are 

required to satisfy section 401(a)(9)(G). 

(5) Annuity contracts—(i) Purchase of 

annuity contract permitted. A plan may 

satisfy section 401(a)(9) by the purchase 

of an annuity contract from an 

insurance company in accordance with 

§ 1.401(a)(9)–6(d) with the employee’s 

entire individual account provided that 

the terms of the annuity satisfy 

§ 1.401(a)(9)–6 and paragraph (e) of this 

section. However, a distribution of an 

annuity contract is not a distribution for 

purposes of this section. 

(ii) Transition from defined 

contribution rules to defined benefit 

rules. If an annuity is purchased in 

accordance with paragraph (a)(5)(i) of 

this section after distributions are 

required to commence (the required 

beginning date, in the case of 

distributions commencing before death, 

or the calendar year determined under 

§ 1.401(a)(9)–3(c)(4) or, if applicable, 

§ 1.401(a)(9)–3(d), in the case of 

distributions commencing after death), 

then the plan will satisfy section 

401(a)(9) only if, in the year of purchase, 

distributions from the individual 

account satisfy this section, and for 

calendar years following the year of 

purchase, payments under the annuity 

contract are made in accordance with 

§ 1.401(a)(9)–6 and satisfy paragraph (e) 

of this section. Payments under the 

annuity contract during the year in 

which the annuity contract is purchased 

are treated as distributions from the 

individual account for purposes of 

determining whether the distributions 

from the individual account satisfy this 

section in the calendar year of purchase. 

(iii) Purchase of annuity contract with 

portion of employee’s account. A 

portion of an employee’s account 

balance under a defined contribution 

plan is permitted to be used to purchase 

an annuity contract while another 

portion remains in the account, 

provided that the requirements of 

paragraphs (a)(5)(i) and (ii) of this 

section are satisfied (other than the 

requirement that the contract be 

purchased with the employee’s entire 

individual account). In that case, in 

order to satisfy section 401(a)(9) for 

calendar years after the calendar year of 

purchase, the remaining account 

balance under the plan must be 

distributed in accordance with this 

section. 

(6) Impact of additional distributions 

in prior years. If, for any distribution 

calendar year, the amount distributed 

exceeds the required minimum 

distribution for that calendar year, no 

credit towards a required minimum 

distribution will be given in subsequent 

calendar years for the excess 

distribution. 

(b) Determination of account 

balance—(1) General rule. In the case of 

an individual account under a defined 

contribution plan, the benefit used in 

determining the required minimum 

distribution for a distribution calendar 

year is the account balance as of the last 

valuation date in the calendar year 

preceding that distribution calendar 

year (valuation calendar year) adjusted 

in accordance with this paragraph (b). 

For this purpose, except as provided in 

§ 1.401(a)(9)–8(a), all of an employee’s 

accounts under the plan are aggregated. 

Thus, all separate accounts, including a 

separate account for employee 

contributions under section 72(d)(2), are 

aggregated for purposes of this section. 

(2) Adjustment for subsequent 

allocations. The account balance is 

increased by the amount of any 

contributions or forfeitures allocated to 

the account balance as of dates in the 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10535 

valuation calendar year after the 

valuation date. For this purpose, 

contributions that are allocated to the 

account balance as of dates in the 

valuation calendar year after the 

valuation date, but that are not actually 

made during the valuation calendar 

year, may be excluded. 

(3) Adjustment for subsequent 

distributions. The account balance is 

decreased by distributions made in the 

valuation calendar year after the 

valuation date. 

(4) Exclusion for QLAC contract. The 

account balance does not include the 

value of any qualifying longevity 

annuity contract (QLAC), defined in 

§ 1.401(a)(9)–6(q), that is held under the 

plan. 

(5) Treatment of rollovers. If an 

amount is distributed from a plan and 

rolled over to another plan (receiving 

plan), § 1.401(a)(9)–7(b) provides 

additional rules for determining the 

benefit and required minimum 

distribution under the receiving plan. If 

an amount is transferred from one plan 

(transferor plan) to another plan 

(transferee plan) in a transfer to which 

section 414(l) applies, § 1.401(a)(9)–7(c) 

and (d) provide additional rules for 

determining the amount of the benefit 

and required minimum distribution 

under both the transferor and transferee 

plans. 

(c) Determination of applicable 

denominator during employee’s 

lifetime—(1) General rule. Except as 

provided in paragraph (c)(2) of this 

section (relating to a spouse beneficiary 

who is more than 10 years younger than 

the employee), the applicable 

denominator for required minimum 

distributions for each distribution 

calendar year beginning with the first 

distribution calendar year (as described 

in paragraph (a)(2)(ii) of this section) is 

determined using the Uniform Lifetime 

Table in § 1.401(a)(9)–9(c)(2) for the 

employee’s age as of the employee’s 

birthday in the relevant distribution 

calendar year. The requirement to take 

an annual distribution calculated in 

accordance with the preceding sentence 

applies for distribution calendar years 

up to and including the calendar year 

that includes the employee’s date of 

death. Thus, a required minimum 

distribution is due for the calendar year 

of the employee’s death, and that 

amount must be distributed during that 

year to the beneficiary to the extent it 

has not already been distributed to the 

employee. 

(2) Spouse is sole beneficiary—(i) 

Determination of applicable 

denominator. If the sole beneficiary of 

an employee is the employee’s spouse 

who is more than 10 years younger than 

the employee, then the applicable 

denominator is the joint and last 

survivor life expectancy for the 

employee and spouse determined using 

the Joint and Last Survivor Life 

Expectancy Table in § 1.401(a)(9)–9(d) 

for the employee’s and spouse’s ages as 

of their birthdays in the relevant 

distribution calendar year (rather than 

the applicable denominator determined 

under paragraph (c)(1) of this section). 

(ii) Spouse must be sole beneficiary at 

all times. Except as otherwise provided 

in paragraph (c)(2)(iii) of this section 

(relating to a death or divorce in a 

calendar year), the spouse is the sole 

beneficiary for purposes of determining 

the applicable denominator for a 

distribution calendar year during the 

employee’s lifetime only if the spouse is 

the sole beneficiary of the employee’s 

entire interest at all times during the 

distribution calendar year. 

(iii) Change in marital status. If the 

employee and the employee’s spouse 

are married on January 1 of a 

distribution calendar year, but do not 

remain married throughout that year 

(that is, the employee or the employee’s 

spouse dies or they become divorced 

during that year), the employee will not 

fail to have a spouse as the employee’s 

sole beneficiary for that year merely 

because they are not married throughout 

that year. However, the change in 

beneficiary due to the death or divorce 

of the spouse in a distribution calendar 

year will be effective for purposes of 

determining the applicable denominator 

under section 401(a)(9) and this 

paragraph (c) for the following calendar 

years. 

(d) Applicable denominator after 

employee’s death—(1) Death on or after 

the employee’s required beginning 

date—(i) In general. If an employee dies 

after distribution has begun as 

determined under § 1.401(a)(9)–2(a)(3) 

(generally, on or after the employee’s 

required beginning date), distributions 

must satisfy section 401(a)(9)(B)(i). In 

order to satisfy this requirement, the 

applicable denominator after the 

employee’s death is determined under 

the rules of this paragraph (d)(1). The 

requirement to take an annual 

distribution in accordance with the 

preceding sentence applies for 

distribution calendar years up to and 

including the calendar year that 

includes the beneficiary’s date of death. 

Thus, a required minimum distribution 

is due for the calendar year of the 

beneficiary’s death, and that amount 

must be distributed during that calendar 

year to a beneficiary of the deceased 

beneficiary to the extent it has not 

already been distributed to the deceased 

beneficiary. The distributions also must 

satisfy section 401(a)(9)(B)(ii) (or, if 

applicable, section 401(a)(9)(B)(iii), 

taking into account sections 

401(a)(9)(E)(iii), and 401(a)(9)(H)(ii) and 

(iii)). In order to satisfy those 

requirements, in addition to 

determining the applicable denominator 

under the rules of this paragraph (d)(1), 

the distributions also must satisfy any 

applicable requirements under 

paragraph (e) of this section. 

(ii) Employee with designated 

beneficiary. If the employee has a 

designated beneficiary as of the date 

determined under § 1.401(a)(9)–4(c), the 

applicable denominator is the greater 

of— 

(A) The designated beneficiary’s 

remaining life expectancy; and 

(B) The employee’s remaining life 

expectancy. 

(iii) Employee with no designated 

beneficiary. If the employee does not 

have a designated beneficiary as of the 

date determined under § 1.401(a)(9)– 

4(c), the applicable denominator is the 

employee’s remaining life expectancy. 

(2) Death before an employee’s 

required beginning date. If an employee 

dies before distributions have begun (as 

determined under § 1.401(a)(9)–2(a)(3)) 

and the life expectancy rule described 

in § 1.401(a)(9)–3(c)(4) applies, then the 

applicable denominator for distribution 

calendar years beginning with the first 

distribution calendar year (as described 

in paragraph (a)(2)(iii) of this section) is 

the designated beneficiary’s remaining 

life expectancy. 

(3) Remaining life expectancy—(i) Life 

expectancy table. For purposes of this 

paragraph (d), all life expectancies are 

determined using the Single Life Table 

in § 1.401(a)(9)–9(c)(1). 

(ii) Employee’s life expectancy. The 

employee’s remaining life expectancy is 

determined initially using the 

employee’s age as of the employee’s 

birthday in the calendar year of the 

employee’s death. In subsequent 

calendar years, the remaining life 

expectancy is determined by reducing 

that initial life expectancy by one for 

each calendar year that has elapsed after 

that first calendar year. 

(iii) Nonspouse designated 

beneficiary. If the designated beneficiary 

is not the employee’s surviving spouse, 

then the designated beneficiary’s 

remaining life expectancy is determined 

initially using the beneficiary’s age as of 

the beneficiary’s birthday in the 

calendar year following the calendar 

year of the employee’s death. Except as 

otherwise provided in paragraph 

(d)(3)(iv) of this section, for subsequent 

calendar years, the designated 

beneficiary’s remaining life expectancy 

is determined by reducing that initial 


jspears on DSK121TN23PROD with PROPOSALS3
10536 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

life expectancy by one for each calendar 

year that has elapsed after that first 

calendar year. 

(iv) Spouse as designated beneficiary. 

If the surviving spouse of the employee 

is the employee’s sole beneficiary, then 

the surviving spouse’s remaining life 

expectancy is redetermined each 

distribution calendar year using the 

surviving spouse’s age as of the 

surviving spouse’s birthday in that 

calendar year. 

(e) Distribution of employee’s entire 

interest required—(1) In general. Except 

as provided in paragraph (f) of this 

section, if an employee’s accrued benefit 

is in the form of an individual account 

under a defined contribution plan, then 

the entire interest of the employee must 

be distributed by the end of the earliest 

of the calendar years described in 

paragraph (e)(2), (3), (4), or (5) of this 

section. However, the preceding 

sentence does not apply if section 

401(a)(9)(H) does not apply with respect 

to the employee (for example, if both the 

employee and the employee’s 

designated beneficiary died before 

January 1, 2020). See § 1.401(a)(9)–1(b) 

for rules relating to the section 

401(a)(9)(H) effective date. 

(2) 10-year limit for designated 

beneficiary who is not an eligible 

designated beneficiary. If the 

employee’s designated beneficiary is not 

an eligible designated beneficiary (as 

determined in accordance with 

§ 1.401(a)(9)–4(e)), then the calendar 

year described in this paragraph (e)(2) is 

the tenth calendar year following the 

calendar year of the employee’s death. 

(3) 10-year limit following death of 

eligible designated beneficiary. If the 

employee’s designated beneficiary is an 

eligible designated beneficiary (as 

determined in accordance with 

§ 1.401(a)(9)–4(e)), then the calendar 

year described in this paragraph (e)(3) is 

the tenth calendar year following the 

calendar year of the designated 

beneficiary’s death. 

(4) 10-year limit after minor child of 

the employee reaches age of majority. If 

the employee’s designated beneficiary is 

an eligible designated beneficiary only 

because the beneficiary is the child of 

the employee who has not reached the 

age of majority at the time of the 

employee’s death, then the calendar 

year described in this paragraph (e)(4) is 

the tenth calendar year following the 

calendar year in which the designated 

beneficiary reaches the age of majority. 

(5) Life expectancy limit for older 

eligible designated beneficiaries. If the 

employee’s designated beneficiary is an 

eligible designated beneficiary (as 

determined in accordance with 

§ 1.401(a)(9)–4(e)) and the applicable 

denominator is determined in 

accordance with paragraph (d)(1)(ii)(B) 

of this section (the employee’s 

remaining life expectancy), then the 

calendar year described in this 

paragraph (e)(5) is the calendar year in 

which the applicable denominator 

would have been less than or equal to 

one if it were determined in accordance 

with paragraph (d)(1)(ii)(A) of this 

section (the designated beneficiary’s 

remaining life expectancy). 

(f) Rules for multiple designated 

beneficiaries—(1) Determination of 

applicable denominator—(i) General 

rule. Except as otherwise provided in 

paragraph (f)(1)(ii) of this section and 

§ 1.401(a)(9)–8(a), if the employee has 

more than one designated beneficiary, 

then the determination of the applicable 

denominator under paragraph (d) of this 

section is made using the oldest 

designated beneficiary of the employee. 

(ii) Applicable multi-beneficiary 

trusts. If an employee’s beneficiary is a 

type II applicable multi-beneficiary trust 

described in § 1.401(a)(9)–4(g)(3)(i), then 

only the trust beneficiaries described in 

§ 1.401(a)(9)–4(g)(3)(i)(A) are taken into 

account in determining the oldest 

designated beneficiary for purposes of 

paragraph (f)(1)(i) of this section. 

(2) Determination of when entire 

interest is required to be distributed—(i) 

General rule. Except as otherwise 

provided in paragraphs (f)(2)(ii) and (iii) 

of this section and § 1.401(a)(9)–8(a), if 

an employee has more than one 

designated beneficiary, then paragraph 

(e)(1) of this section is applied with 

respect to the oldest of the employee’s 

designated beneficiaries. 

(ii) Special rule for minor child. If any 

of the employee’s designated 

beneficiaries is an eligible designated 

beneficiary because that designated 

beneficiary is described in § 1.401(a)(9)– 

4(e)(1)(ii) (relating to the child of the 

employee who has not reached the age 

of majority at the time of the employee’s 

death), then— 

(A) Paragraphs (e)(3) and (4) of this 

section are applied using the oldest of 

the designated beneficiaries who are 

described in § 1.401(a)(9)–4(e)(1)(ii); and 

(B) Paragraphs (e)(2) and (5) of this 

section do not apply. 

(iii) Applicable multi-beneficiary 

trusts. If an employee’s beneficiary is a 

type II applicable multi-beneficiary trust 

described in § 1.401(a)(9)–4(g)(3)(i), 

then— 

(A) Paragraph (e)(3) of this section 

applies as if the death of the employee’s 

eligible designated beneficiary does not 

occur until the death of the last trust 

beneficiary who is described in 

§ 1.401(a)(9)–4(g)(3)(i)(A); and 

(B) Paragraph (e)(5) of this section 

does not apply. 

(g) Treatment of nonvested amounts. 

If the employee’s benefit is in the form 

of an individual account under a 

defined contribution plan, the benefit 

used to determine the required 

minimum distribution for any 

distribution calendar year will be 

determined in accordance with 

paragraph (a) of this section without 

regard to whether or not all of the 

employee’s benefit is vested. If, as of the 

end of a distribution calendar year (or 

as of the employee’s required beginning 

date, in the case of the employee’s first 

distribution calendar year), the total 

amount of the employee’s vested benefit 

is less than the required minimum 

distribution for the calendar year, only 

the vested portion, if any, of the 

employee’s benefit is required to be 

distributed by the end of the calendar 

year (or, if applicable, by the employee’s 

required beginning date). However, the 

required minimum distribution for the 

subsequent calendar year must be 

increased by the sum of amounts not 

distributed in prior calendar years 

because the employee’s vested benefit 

was less than the required minimum 

distribution determined in accordance 

with paragraph (a) of this section. 

(h) Distributions taken into account. 

Except as provided in this paragraph 

(h), all amounts distributed from an 

individual account under a defined 

contribution plan are distributions that 

are taken into account in determining 

whether this section is satisfied, 

regardless of whether the amount is 

includible in income. Thus, for 

example, amounts that are excluded 

from income as recovery of investment 

in the contract under section 72 are 

taken into account for purposes of 

determining whether this section is 

satisfied for a calendar year. Similarly, 

amounts excluded from income as net 

unrealized appreciation on employer 

securities also are taken into account for 

purposes of satisfying this section. 

However, an amount is not taken into 

account in determining whether the 

required minimum distribution has 

been made for a distribution calendar 

year if that amount is described in 

§ 1.402(c)–2(c)(3) (relating to amounts 

that are not treated as eligible rollover 

distributions). 

§ 1.401(a)(9)–6 Required minimum 

distributions for defined benefit plans and 

annuity contracts. 

(a) Defined benefit plans—(1) In 

general. In order to satisfy section 

401(a)(9), except as otherwise provided 

in this section, distributions of the 

employee’s entire interest under a 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10537 

defined benefit plan must be paid in the 

form of periodic annuity payments for 

the employee’s life (or the joint lives of 

the employee and beneficiary) or over a 

period certain that does not exceed the 

maximum length of the period certain 

determined in accordance with 

paragraph (c) of this section. The 

interval between payments for the 

annuity must not exceed one year and, 

except as provided in paragraph 

(o)(4)(ii) of this section, must be uniform 

over the entire distribution period. Once 

payments have commenced over a 

period, the period may only be changed 

in accordance with paragraph (n) of this 

section. Life (or joint and survivor) 

annuity payments must satisfy the 

minimum distribution incidental benefit 

requirements of paragraph (b) of this 

section. Except as otherwise provided in 

this section (for example, permitted 

increases described in paragraph (o) of 

this section), all payments (whether 

paid over an employee’s life, joint lives, 

or a period certain) also must be 

nonincreasing. 

(2) Definition of life annuity. An 

annuity described in this section may be 

a life annuity (or joint and survivor 

annuity) with a period certain, provided 

that the life annuity (or joint and 

survivor annuity, if applicable) and the 

period certain payments each meet the 

requirements of paragraph (a)(1) of this 

section. For purposes of this section, if 

distributions are permitted to be made 

over the lives of the employee and the 

designated beneficiary, references to a 

life annuity include a joint and survivor 

annuity. 

(3) Annuity commencement—(i) First 

payment and frequency. Annuity 

payments must commence on or before 

the employee’s required beginning date 

(within the meaning of § 1.401(a)(9)– 

2(b)). The first payment, which must be 

made on or before the employee’s 

required beginning date, must be the 

payment that is required for one 

payment interval. The second payment 

need not be made until the end of the 

next payment interval even if that 

payment interval ends in the next 

calendar year. Similarly, if the employee 

dies before the required beginning date, 

and distributions are to be made in 

accordance with section 401(a)(9)(B)(iii) 

(or, if applicable, section 

401(a)(9)(B)(iv)), then the first payment, 

which must be made on or before the 

date determined under § 1.401(a)(9)– 

3(b)(3) or (d) (whichever is applicable), 

must be the payment that is required for 

one payment interval. Payment intervals 

are the periods for which payments are 

received, for example, bimonthly, 

monthly, semi-annually, or annually. 

All benefit accruals as of the last day of 

the first distribution calendar year must 

be included in the calculation of the 

amount of annuity payments for 

payment intervals ending on or after the 

employee’s required beginning date. 

(ii) Example. A defined benefit plan 

(Plan X) provides monthly annuity 

payments of $500 for the life of 

unmarried participants with a 10-year 

period certain. An unmarried, retired 

participant (A) in Plan X attains age 72 

in 2025. In order to meet the 

requirements of this paragraph (a)(3), 

the first monthly payment of $500 must 

be made on behalf of A on or before 

April 1, 2026, and the payments must 

continue to be made in monthly 

payments of $500 thereafter for the life 

of A (or over the 10-year period certain, 

if longer). 

(4) Single-sum distributions—(i) In 

general. In the case of a single-sum 

distribution of an employee’s entire 

accrued benefit during a distribution 

calendar year, the portion of the 

distribution that is the required 

minimum distribution for the 

distribution calendar year (and thus not 

an eligible rollover distribution 

pursuant to section 402(c)(4)(B)) is 

determined using the rule in either 

paragraph (a)(4)(ii) or (iii) of this 

section. 

(ii) Treatment as individual account. 

The portion of the single-sum 

distribution that is a required minimum 

distribution is determined by treating 

the single-sum-distribution as a 

distribution from an individual account 

plan and treating the amount of the 

single-sum distribution as the 

employee’s account balance as of the 

end of the relevant valuation calendar 

year. If the single-sum distribution is 

being made in the calendar year that 

includes the required beginning date 

and the required minimum distribution 

for the employee’s first distribution 

calendar year has not been distributed, 

the portion of the single-sum 

distribution that represents the required 

minimum distribution for the 

employee’s first and second distribution 

calendar years is not eligible for 

rollover. 

(iii) Treatment as first annuity 

payment. The portion of the single-sum 

distribution that is a required minimum 

distribution is permitted to be 

determined by expressing the 

employee’s benefit as an annuity that 

would satisfy this section with an 

annuity starting date that is the first day 

of the distribution calendar year for 

which the required minimum 

distribution is being determined, and 

treating one year of annuity payments as 

the required minimum distribution for 

that year (and therefore, not an eligible 

rollover distribution). If the single-sum 

distribution is being made in the 

calendar year that includes the required 

beginning date, and the required 

minimum distribution for the 

employee’s first distribution calendar 

year has not been made, then the benefit 

must be expressed as an annuity with an 

annuity starting date that is the first day 

of the first distribution calendar year, 

and the payments for the first two 

distribution calendar years are treated as 

required minimum distributions (and 

therefore not eligible rollover 

distributions). 

(5) Death benefits. The rule in 

paragraph (a)(1) of this section 

prohibiting increasing payments under 

an annuity applies to payments made 

upon the death of an employee. 

However, the payment of an ancillary 

death benefit described in this 

paragraph (a)(5) may be disregarded in 

determining whether annuity payments 

are increasing, and it can be excluded in 

determining an employee’s entire 

interest. A death benefit with respect to 

an employee’s benefit is an ancillary 

death benefit for purposes of this 

paragraph (a) if— 

(i) It is not paid as part of the 

employee’s accrued benefit or under any 

optional form of the employee’s benefit; 

and 

(ii) The death benefit, together with 

any other potential payments with 

respect to the employee’s benefit that 

may be provided to a survivor, satisfies 

the incidental benefit requirement of 

§ 1.401–1(b)(1)(i). 

(6) Separate treatment of separate 

identifiable components. If an 

employee’s benefit under a defined 

benefit plan consists of separate 

identifiable components that are subject 

to different distribution elections, then 

the rules of this section may be applied 

separately to each of those components. 

(7) Additional guidance. Additional 

guidance regarding how distributions 

under a defined benefit plan must be 

paid in order to satisfy section 401(a)(9) 

may be issued by the Commissioner in 

revenue rulings, notices, or other 

guidance published in the Internal 

Revenue Bulletin. See § 601.601(d) of 

this chapter. 

(b) Application of incidental benefit 

requirement—(1) Life annuity for 

employee. If the employee’s benefit is 

paid in the form of a life annuity for the 

life of the employee satisfying section 

401(a)(9) without regard to the 

minimum distribution incidental benefit 

requirement under section 401(a)(9)(G) 

(MDIB requirement), then the MDIB 

requirement will be satisfied. 

(2) Joint and survivor annuity—(i) 

Determination of designated 


jspears on DSK121TN23PROD with PROPOSALS3
10538 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

beneficiary. If the employee’s benefit is 

paid in the form of a life annuity for the 

lives of the employee and a designated 

beneficiary, then the designated 

beneficiary is determined as of the 

annuity starting date. 

(ii) Spouse beneficiary. If the 

employee’s sole beneficiary is the 

employee’s spouse and the distributions 

satisfy section 401(a)(9) without regard 

to the MDIB requirement, the 

distributions to the employee will be 

deemed to satisfy the MDIB 

requirement. For example, if an 

employee’s benefit is being distributed 

in the form of a joint and survivor 

annuity for the lives of the employee 

and the employee’s spouse and the 

spouse is the sole beneficiary of the 

employee, the amount of the periodic 

payment payable to the spouse would 

not violate the MDIB requirement if it 

were 100 percent of the annuity 

payment payable to the employee, 

regardless of the difference in the ages 

between the employee and the 

employee’s spouse. 

(iii) Joint and survivor annuity, 

nonspouse beneficiary—(A) Explanation 

of rule. If distributions commence in the 

form of a joint and survivor annuity for 

the lives of the employee and a 

beneficiary other than the employee’s 

spouse, and the employee is age 72 or 

older on the employee’s birthday in the 

calendar year that includes the annuity 

starting date, then the MDIB 

requirement will not be satisfied as of 

the date distributions commence unless, 

under the distribution option, the 

annuity payments satisfy the conditions 

of this paragraph (b)(2)(iii)(A). The 

periodic annuity payments to the 

survivor satisfy this paragraph 

(b)(2)(iii)(A) only if, at any time on or 

after the employee’s required beginning 

date, those payments do not exceed the 

applicable percentage of the periodic 

annuity payment payable to the 

employee using the table in paragraph 

(b)(2)(iii)(B) of this section. The 

applicable percentage is based on the 

employee/beneficiary age difference, 

which is equal to the excess of the age 

of the employee over the age of the 

beneficiary based on their ages on their 

birthdays in the calendar year that 

includes the annuity starting date. In the 

case of an annuity that provides for 

increasing payments, the requirement of 

this paragraph (b)(2)(iii)(A) will not be 

violated merely because benefit 

payments to the beneficiary increase, 

provided the increase is determined in 

the same manner for the employee and 

the beneficiary. See paragraph (k) of this 

section for the rule for annuity 

payments with an annuity starting date 

that is before the calendar year in which 

an employee attains age 72. 

(B) Table applicable to paragraph 

(b)(2)(iii)(B) of this section. 

TABLE 1—APPLICABLE TO PARAGRAPH

(b)(2)(iii)(B) OF THIS SECTION

Employee/beneficiary 

age difference 

Applicable 

percentage 

10 years or less ...................... 100 

11 ............................................ 96 

12 ............................................ 93 

13 ............................................ 90 

14 ............................................ 87 

15 ............................................ 84 

16 ............................................ 82 

17 ............................................ 79 

18 ............................................ 77 

19 ............................................ 75 

20 ............................................ 73 

21 ............................................ 72 

22 ............................................ 70 

23 ............................................ 68 

24 ............................................ 67 

25 ............................................ 66 

26 ............................................ 64 

27 ............................................ 63 

28 ............................................ 62 

29 ............................................ 61 

30 ............................................ 60 

31 ............................................ 59 

32 ............................................ 59 

33 ............................................ 58 

34 ............................................ 57 

35 ............................................ 56 

36 ............................................ 56 

37 ............................................ 55 

38 ............................................ 55 

39 ............................................ 54 

40 ............................................ 54 

41 ............................................ 53 

42 ............................................ 53 

43 ............................................ 53 

44 and greater ........................ 52 

(3) Period certain and annuity 

features. If a distribution form includes 

a period certain, the amount of the 

annuity payments payable to the 

beneficiary need not be reduced during 

the period certain, but in the case of a 

joint and survivor annuity with a period 

certain, the amount of the annuity 

payments payable to the beneficiary 

must satisfy paragraph (b)(2)(iii)(A) of 

this section after the expiration of the 

period certain. 

(4) Deemed satisfaction of incidental 

benefit rule. Except in the case of 

distributions with respect to an 

employee’s benefit that include an 

ancillary death benefit described in 

paragraph (a)(5) of this section, to the 

extent the incidental benefit 

requirement of § 1.401–1(b)(1)(i) 

requires a distribution, that requirement 

is deemed to be satisfied if distributions 

satisfy the MDIB requirement of this 

paragraph (b). If the employee’s benefits 

include an ancillary death benefit 

described in paragraph (a)(5) of this 

section, the benefits (including the 

ancillary death benefit) must be 

distributed in accordance with the 

incidental benefit requirement 

described in § 1.401–1(b)(1)(i) and the 

benefits (excluding the ancillary death 

benefit) must also satisfy the MDIB 

requirement of this paragraph (b). 

(c) Period certain annuity—(1) 

Distributions commencing during the 

employee’s life. If the employee is age 

72 or older on the employee’s birthday 

in the calendar year that includes the 

annuity starting date, then the period 

certain is not permitted to exceed the 

applicable denominator for the calendar 

year that includes the annuity starting 

date that would apply pursuant to 

§ 1.401(a)(9)–5(c) if the plan were a 

defined contribution plan. However, 

that applicable denominator is 

determined taking into account the rules 

of § 1.401(a)(9)–5(c)(2) (relating to a 

spouse who is more than 10 years 

younger than the employee) only if the 

period certain is not provided in 

conjunction with a life annuity under 

paragraph (a)(2) of this section. See 

paragraph (k) of this section for the rule 

for annuity payments with an annuity 

starting date that is before the calendar 

year in which the employee attains age 

72. 

(2) Distributions commencing after 

the employee’s death. If the employee 

dies before the required beginning date 

and annuity distributions commence 

after the death of the employee under 

the life expectancy rule (under section 

401(a)(9)(B)(iii) or (iv)), the period 

certain for any distributions 

commencing after death may not exceed 

the applicable denominator that would 

apply pursuant to § 1.401(a)(9)–5(d)(2) 

for the calendar year that includes the 

annuity starting date if the plan were a 

defined contribution plan. 

(d) Use of annuity contract. A plan 

will not fail to satisfy section 401(a)(9) 

merely because distributions are made 

from an annuity contract purchased 

with the employee’s benefit by the plan 

from an insurance company that is 

licensed to do business under the laws 

of the State in which the contract is 

sold, provided that the payments satisfy 

the requirements of this section. Except 

in the case of a qualified longevity 

annuity contract (QLAC) described in 

paragraph (q) of this section, if the 

annuity contract is purchased after the 

required beginning date, then the first 

payment interval must begin on or 

before the purchase date and the 

payment that is made at the end of that 

payment interval is the amount required 

for one payment interval. If the 

payments actually made under the 

annuity contract do not meet the 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10539 

requirements of this section, the plan 

fails to satisfy section 401(a)(9). See also 

paragraph (o) of this section permitting 

certain increases under annuity 

contracts. 

(e) Treatment of additional accruals— 

(1) General rule. If additional benefits 

accrue in a calendar year after the 

employee’s first distribution calendar 

year, distribution of the amount that 

accrues in that later calendar year must 

commence in accordance with 

paragraph (a) of this section beginning 

with the first payment interval ending 

in the calendar year immediately 

following the calendar year in which 

that amount accrues. 

(2) Administrative delay. A plan will 

not fail to satisfy this section merely 

because there is an administrative delay 

in the commencement of the 

distribution of the additional benefits 

accrued in a calendar year, provided 

that— 

(i) The payment commences no later 

than the end of the first calendar year 

following the calendar year in which the 

additional benefit accrues; and 

(ii) The total amount paid during that 

first calendar year with respect to those 

additional benefits is no less than the 

total amount that was required to be 

paid during that year under paragraph 

(e)(1) of this section. 

(f) Treatment of nonvested benefits. In 

the case of annuity distributions under 

a defined benefit plan, if any portion of 

the employee’s benefit is not vested as 

of December 31 of a distribution 

calendar year, the portion that is not 

vested as of that date is treated as not 

having accrued for purposes of 

determining the required minimum 

distribution for that distribution 

calendar year. When an additional 

portion of the employee’s benefit 

becomes vested, that portion will be 

treated as an additional accrual. See 

paragraph (e) of this section for the rules 

for distributing benefits that accrue 

under a defined benefit plan after the 

employee’s first distribution calendar 

year. 

(g) Requirement for actuarial 

increase—(1) General rule—(i) 

Applicability of increase. Except as 

otherwise provided in this paragraph 

(g), if an employee retires after the 

calendar year in which the employee 

attains age 701⁄2, then, in order to satisfy 

section 401(a)(9)(C)(iii), the employee’s 

accrued benefit under a defined benefit 

plan must be actuarially increased for 

the period (if any) from the start date 

described in paragraph (g)(1)(ii) of this 

section to the end date described in 

paragraph (g)(1)(iii) of this section. 

(ii) Start date for actuarial increase. 

The start date for the required actuarial 

increase is April 1 following the 

calendar year in which the employee 

attains age 701⁄20 (or January 1, 1997, if 

the employee attained 701⁄2 prior to 

January 1, 1997). 

(iii) End date for actuarial increase. 

The end date for the required actuarial 

increase is the date on which benefits 

commence after retirement in a form 

that satisfies paragraphs (a) and (h) of 

this section. 

(iv) Determination of when employee 

attains age 701⁄2. See § 1.401(a)(9)– 

2(b)(2)(ii) for the determination of the 

calendar year in which an employee 

attains age 701⁄2. 

(2) Nonapplication to 5-percent 

owners. This paragraph (g) does not 

apply to an employee if that employee 

is a 5-percent owner (as defined in 

section 416) with respect to the plan 

year ending in the calendar year in 

which the employee attains age 72. 

(3) Nonapplication to governmental 

and church plans. The actuarial 

increase required under this paragraph 

(g) does not apply to a governmental 

plan (within the meaning of section 

414(d)) or a church plan. For purposes 

of this paragraph (g)(3)— 

(i) The term church plan means a plan 

maintained by a church for church 

employees; 

(ii) The term church means a church 

(as defined in section 3121(w)(3)(A)) or 

a qualified church-controlled 

organization (as defined in section 

3121(w)(3)(B)); and 

(iii) The determination of whether an 

employee is a church employee is made 

without regard to section 414(e)(3)(B). 

(h) Amount of actuarial increase—(1) 

In general. In order to satisfy section 

401(a)(9)(C)(iii), the retirement benefits 

payable with respect to an employee as 

of the end of the period for which 

actuarial increases must be provided as 

described in paragraph (g) of this 

section must be no less than— 

(i) The actuarial equivalent of the 

employee’s retirement benefits that 

would have been payable as of the start 

date described in paragraph (g)(1)(ii) of 

this section if benefits had commenced 

on that date; plus 

(ii) The actuarial equivalent of any 

additional benefits accrued after that 

date; reduced by 

(iii) The actuarial equivalent of any 

distributions made with respect to the 

employee’s retirement benefits after that 

date. 

(2) Actuarial equivalence basis. For 

purposes of this paragraph (h), actuarial 

equivalence is determined using the 

plan’s assumptions for determining 

actuarial equivalence for purposes of 

satisfying section 411. 

(3) Coordination with section 411 

actuarial increase. In order for any of an 

employee’s accrued benefit to be 

nonforfeitable as required under section 

411, a defined benefit plan must make 

an actuarial adjustment to an accrued 

benefit, the payment of which is 

deferred past normal retirement age. 

The only exception to this rule is that, 

generally, no actuarial adjustment is 

required to reflect the period during 

which a benefit is suspended as 

permitted under section 411(a)(3)(B). 

The actuarial increase required under 

section 401(a)(9)(C)(iii) for the period (if 

any) described in paragraph (g)(1)(i) of 

this section generally is the same as, and 

not in addition to, the actuarial increase 

required for the same period under 

section 411 to reflect any delay in the 

payment of retirement benefits after 

normal retirement age. However, unlike 

the actuarial increase required under 

section 411, the actuarial increase 

required under section 401(a)(9)(C)(iii) 

must be provided even during any 

period during which an employee’s 

benefit has been suspended in 

accordance with section 411(a)(3)(B). 

(i) [Reserved] 

(j) Distributions restricted pursuant to 

section 436—(1) General rule. If an 

employee’s entire interest is being 

distributed in accordance with the 5- 

year rule of section 401(a)(9)(B)(ii), a 

plan is not treated as failing to satisfy 

section 401(a)(9) merely because of the 

application of a payment restriction 

under section 436(d), provided that 

distributions of the employee’s interest 

commence by the end of the calendar 

year that includes the fifth anniversary 

of the date of the employee’s death and, 

after the annuity starting date, those 

distributions are paid in a form that is 

as accelerated as permitted under 

section 436(d), as described in 

paragraph (j)(2) or (j)(3) of this section. 

(2) Payments restricted under section 

436(d)(3). If the payment restriction of 

section 436(d)(3) applies at the time 

benefits commence under paragraph 

(j)(1) of this section, then distributions 

are made in a form that is as accelerated 

as permitted under section 436(d) if the 

benefits are paid in a single-sum 

payment equal to the maximum amount 

allowed under section 436(d)(3), with 

the remainder paid as a life annuity to 

the beneficiary (or over the course of 

240 months pursuant to § 1.436– 

1(j)(6)(ii) in the case of a beneficiary that 

is not an individual), subject to a 

requirement that the benefit remaining 

is commuted to a single-sum payment 

when the section 436(d)(3) payment 

restriction ceases to apply (to the extent 

that a single-sum payment is permitted 

under section 436(d)(1) and 436(d)(2)). 


jspears on DSK121TN23PROD with PROPOSALS3
10540 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

(3) Payments restricted under section 

436(d)(1) or (2). If a plan is subject to the 

payment restriction in section 436(d)(1) 

or (2) at the time benefits commence 

under paragraph (j)(1) of this section, 

then distributions are made in a form 

that is as accelerated as permitted under 

section 436(d) if the benefits are paid in 

the form of a life annuity to the 

beneficiary (or over the course of 240 

months pursuant to § 1.436–1(j)(6)(ii), in 

the case of a beneficiary that is not an 

individual), subject to a requirement 

that the benefit remaining is commuted 

to a single-sum payment to the extent 

permitted under section 436(d) (for 

example, the maximum amount allowed 

under section 436(d)(3)) when the 

payment restriction under section 

436(d)(1) or (2) ceases to apply. 

(k) Treatment of early 

commencement—(1) General rule. 

Generally, the determination of whether 

a stream of payments satisfies the 

requirements of this section is made as 

of the required beginning date. 

However, if distributions start prior to 

the required beginning date in a 

distribution form that is an annuity 

under which distributions are made in 

accordance with the provisions of 

paragraph (a) of this section and are 

made over a period permitted under 

section 401(a)(9)(A)(ii), then, except as 

provided in this paragraph (k), the 

annuity starting date will be treated as 

the required beginning date for purposes 

of applying the rules of this section and 

§ 1.401(a)(9)–2. Thus, for example, the 

determination of the designated 

beneficiary and the amount of 

distributions will be made as of the 

annuity starting date. Similarly, if the 

employee dies after the annuity starting 

date but before the required beginning 

date determined under § 1.401(a)(9)– 

2(b), then after the employee’s death— 

(i) The remaining portion of the 

employee’s interest must continue to be 

distributed in accordance with this 

section over the remaining period over 

which distributions commenced; and 

(ii) The rules in § 1.401(a)(9)–3 

relating to death before the required 

beginning date do not apply. 

(2) Joint and survivor annuity, 

nonspouse beneficiary—(i) Application 

of MDIB requirement. If distributions 

commence in the form of a joint and 

survivor annuity for the lives of the 

employee and a beneficiary other than 

the employee’s spouse, and as of the 

employee’s birthday in the calendar 

year that includes the annuity starting 

date, the employee is under age 72, then 

the MDIB requirement will not be 

satisfied as of the date distributions 

commence unless, under the 

distribution option, the annuity 

payments to be made on and after the 

employee’s required beginning date 

satisfy the conditions of this paragraph 

(k)(2). The periodic annuity payments 

payable to the survivor satisfy this 

paragraph (k)(2) if, at all times on and 

after the employee’s annuity starting 

date, those payments do not exceed the 

applicable percentage of the periodic 

annuity payment payable to the 

employee using the table in paragraph 

(b)(3)(ii) of this section, but based on the 

adjusted employee/beneficiary age 

difference. The adjusted employee/ 

beneficiary age difference is determined 

by first calculating the employee/ 

beneficiary age difference under 

paragraph (b)(3)(i) of this section and 

then reducing that age difference by the 

number of years by which the employee 

is younger than age 72 on the 

employee’s birthday in the calendar 

year that includes the annuity starting 

date. In the case of an annuity that 

provides for increasing payments, the 

requirement of this paragraph (k)(2) will 

not fail to be satisfied merely because 

benefit payments to the beneficiary 

increase, provided the increase is 

determined in the same manner for the 

employee and the beneficiary. 

(ii) Example—(A) Facts. Distributions 

commence on January 1, 2023 to an 

employee (Z), born March 1, 1957, after 

retirement at age 65. Z’s daughter (Y), 

born February 5, 1987, is Z’s 

beneficiary. The distributions are in the 

form of a joint and survivor annuity for 

the lives of Z and Y with payments of 

$500 a month to Z and upon Z’s death 

of $500 a month to Y (so that the 

monthly payment to Y is 100 percent of 

the monthly amount payable to Z). 

(B) Analysis and conclusion. Under 

paragraph (k)(1) of this section, because 

distributions commence prior to Z’s 

required beginning date and are in the 

form of a joint and survivor annuity for 

the lives of Z and Y, compliance with 

the rules of this section is determined as 

of the annuity starting date. Under this 

paragraph (k)(2), the adjusted employee/ 

beneficiary age difference is calculated 

by taking the excess of the employee’s 

age over the beneficiary’s age and 

subtracting the number of years the 

employee is younger than age 72. In this 

case, Z is 30 years older than Y and is 

commencing benefits 6 years before 

attaining age 72, so the adjusted 

employee-beneficiary age difference is 

24 years. Under the table in paragraph 

(b)(3)(ii) of this section, the applicable 

percentage for a 24-year adjusted 

employee/beneficiary age difference is 

67 percent. The plan does not satisfy the 

MDIB requirement because, as of 

January 1, 2023 (the annuity starting 

date), the distribution option provides 

that, as of Z’s required beginning date, 

the monthly payment to Y upon Z’s 

death will exceed 67 percent of Z’s 

monthly payment. 

(3) Limitation on period certain. If, as 

of the employee’s birthday in the 

calendar year that includes the annuity 

starting date, the employee is under age 

72, then the period certain may not 

exceed the limitation on the period 

certain for an individual who is age 72 

as specified in paragraph (c)(1) of this 

section, increased by the excess of 72 

over the age of the employee on that 

birthday. 

(l) Early commencement for surviving 

spouse. Generally, the determination of 

whether a stream of payments satisfies 

the requirements of this section is made 

as of the date on which distributions are 

required to commence. However, if the 

employee dies prior to the required 

beginning date, distributions commence 

to the surviving spouse of an employee 

over a period permitted under section 

401(a)(9)(B)(iii)(II) prior to the date on 

which distributions are required to 

commence, and the distribution form is 

an annuity under which distributions 

are made in accordance with the 

provisions of paragraph (a) of this 

section, then the annuity starting date 

will be considered the required 

beginning date for purposes of section 

401(a)(9)(B)(iv)(II). Thus, if the 

surviving spouse dies after commencing 

benefits and before the date described in 

401(a)(9)(B)(iv)(II), then after the 

surviving spouse’s death— 

(1) The annuity distributions must 

continue to be made in accordance with 

paragraph (a) of this section over the 

remaining period over which 

distributions commenced; and 

(2) The rules in § 1.401(a)(9)–3(e)(1) 

relating to the death of the surviving 

spouse before the required beginning 

date under section 401(a)(9)(B)(iv)(II) 

will not apply upon the death of the 

surviving spouse. 

(m) Determination of entire interest 

under annuity contract—(1) General 

rule. Prior to the date that an annuity 

contract under an individual account 

plan is annuitized, the interest of an 

employee or beneficiary under that 

contract is treated as an individual 

account for purposes of section 

401(a)(9). Thus, the required minimum 

distribution for any year with respect to 

that interest is determined under 

§ 1.401(a)(9)–5 rather than this section. 

See § 1.401(a)(9)–5(a)(5) for rules 

relating to the satisfaction of section 

401(a)(9) in the year that annuity 

payments commence, § 1.401(a)(9)– 

5(c)(4) for rules relating to QLACs (as 

defined in paragraph (q) of this section), 

and § 1.401(a)(9)–5(a)(5)(iii) for rules 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10541 

relating to the purchase of an annuity 

contract with a portion of an employee’s 

account balance. 

(2) Entire interest. For purposes of 

applying the rules in § 1.401(a)(9)–5, the 

entire interest under the annuity 

contract as of December 31 of the 

relevant valuation calendar year is 

treated as the account balance for the 

valuation calendar year described in 

§ 1.401(a)(9)–5(c). The entire interest 

under an annuity contract is the dollar 

amount credited to the employee or 

beneficiary under the contract plus the 

actuarial present value of any additional 

benefits (for example, survivor benefits 

in excess of the dollar amount credited 

to the employee or beneficiary) that will 

be provided under the contract. 

However, paragraph (m)(3) of this 

section describes certain additional 

benefits that may be disregarded in 

determining the employee’s entire 

interest under the annuity contract. The 

actuarial present value of any additional 

benefits described under this paragraph 

(m) is to be determined using reasonable 

actuarial assumptions, including 

reasonable assumptions as to future 

distributions, and without regard to an 

individual’s health. 

(3) Exclusions—(i) Additional value 

does not exceed 20 percent. The 

actuarial present value of any additional 

benefits provided under an annuity 

contract described in paragraph (m)(2) 

of this section may be disregarded if the 

sum of the dollar amount credited to the 

employee or beneficiary under the 

contract and the actuarial present value 

of the additional benefits is no more 

than 120 percent of the dollar amount 

credited to the employee or beneficiary 

under the contract and the additional 

benefits are one or both of the 

following— 

(A) Additional benefits that, in the 

case of a distribution, are reduced by an 

amount sufficient to ensure that the 

ratio of the sum to the dollar amount 

credited does not increase as a result of 

the distribution, and 

(B) An additional benefit that is the 

right to receive a final payment upon 

death that does not exceed the excess of 

the premiums paid less the amount of 

prior distributions. 

(ii) Return of premium death benefit. 

If the only additional benefit provided 

under the contract is the additional 

benefit described in paragraph 

(m)(3)(i)(B) of this section, the 

additional benefit may be disregarded 

regardless of its value in relation to the 

dollar amount credited to the employee 

or beneficiary under the contract. 

(iii) Additional guidance. The 

Commissioner, in revenue rulings, 

notices, or other guidance published in 

the Internal Revenue Bulletin (see 

§ 601.601(d) of this chapter), may 

provide additional guidance on 

additional benefits that may be 

disregarded. 

(4) Examples. The examples in this 

paragraph (m)(4), which use a 5 percent 

interest rate and the mortality table used 

for distributions subject to section 

417(e)(3) provided in Notice 2019–67, 

2019–52 I.R.B. 1510, illustrate the 

application of the rules in this 

paragraph (m): 

(i) Example 1—(A) Facts. G is the 

owner of a variable annuity contract 

(Contract S) under an individual 

account plan that has not been 

annuitized. Contract S provides a death 

benefit until the end of the calendar 

year in which the owner attains the age 

of 84 equal to the greater of the current 

Contract S notional account value 

(dollar amount credited to G under the 

contract) and the largest notional 

account value at any previous policy 

anniversary reduced proportionally for 

subsequent partial distributions (High 

Water Mark). Contract S provides a 

death benefit in calendar years after the 

calendar year in which the owner 

attains age 84 equal to the current 

notional account value. Contract S 

provides that assets within the contract 

may be invested in a Fixed Account at 

a guaranteed rate of 2 percent. Contract 

S provides no other additional benefits. 

(B) Actuarial calculations. At the end 

of 2028, when G has an attained age of 

78 and 9 months, the notional account 

value of Contract S (after the 

distribution for 2028 of 4.55% of the 

notional account value as of December 

31, 2027) is $550,000, and the High 

Water Mark, before adjustment for any 

withdrawals from Contract S in 2028, is 

$1,000,000. Thus, Contract S will 

provide additional benefits (that is, the 

death benefits in excess of the notional 

account value) through 2034, the year S 

turns 84. The actuarial present value of 

these additional benefits at the end of 

2028 is determined to be $67,978 (12 

percent of the notional account value). 

In making this determination, the 

following assumptions are made: On 

average, deaths occur mid-year; the 

investment return on G’s notional 

account value is 2 percent per annum; 

and minimum required distributions 

(determined without regard to 

additional benefits under the Contract 

S) are made at the end of each year. The 

following two tables summarize the 

actuarial methodology used in 

determining the actuarial present value 

of the additional benefit. 

TABLE 2—APPLICABLE TO PARAGRAPH (m)(4)(i)(B) 

Year 

Death 

benefit 

during 

year 

End-of-year 

notional 

account 

before 

withdrawal 

Average 

notional 

account 

Withdrawal 

at end 

of year 

End-of-year 

notional 

account 

after 

withdrawal 

2028 ......................................................................................... $1,000,000 ........................ ........................ ........................ $550,000 

2029 ......................................................................................... 1 954,545 2 $561,000 3 $555,500 4 $26,606 534,934 

2030 ......................................................................................... 909,306 545,633 540,283 26,482 519,151 

2031 ......................................................................................... 864,291 529,534 524,342 26,760 502,774 

2032 ......................................................................................... 819,740 512,829 507,801 27,177 485,652 

2033 ......................................................................................... 775,430 495,365 490,509 27,438 467,927 

2034 ......................................................................................... 731,620 477,286 472,606 27,853 449,433 

1 $1,000,000 death benefit reduced 4.55 percent for withdrawal during 2028. 

2 Notional account value at end of preceding year (after distribution) increased by 2 percent return for year. 

3Average of $550,000 notional account value at end of preceding year (after distribution) and $561,000 notional account value at end of current year (before distribution). 4 December 31, 2028 notional account (before distribution) divided by uniform lifetime table age 79 factor of 21.1. 


jspears on DSK121TN23PROD with PROPOSALS3
10542 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

TABLE 3—APPLICABLE TO PARAGRAPH (m)(4)(i)(B) 

Year 

Survivorship 

to start 

of year 

Interest 

discount 

to end 

of 2028 

Mortality 

rate during 

year 

Discounted 

additional 

benefits 

within year 

2028 ................................................................................................................. ........................ ........................ ........................ ........................

2029 ................................................................................................................. 1.00000 .97590 5.03321 12,933 

2030 ................................................................................................................. .96679 6.92943 .03739 712,398 

2031 ................................................................................................................. 8.93064 .88517 .04198 11,756 

2032 ................................................................................................................. .89157 .84302 .04715 11,055 

2033 ................................................................................................................. .84953 .80288 .05305 10,310 

2034 ................................................................................................................. .80446 .76464 .05979 9,526 

........................ ........................ ........................ 67,978 

5One-quarter age 78 rate plus three-quarters age 79 rate. 

6Five percent discounted 18 months (1.05(¥1.5)). 7Blended age 79/age 80 mortality rate (.03739) multiplied by the $369,023 excess of death benefit over the average notional account value 

($909,306 less $540,283) multiplied by .96679 probability of survivorship to the start of 2030 multiplied by 18-month interest discount of .92943. 8Survivorship to start of preceding year (.96679) multiplied by probability of survivorship during prior year (1-.03739). 

(C) Conclusion. Because Contract S 

provides that, in the case of a 

distribution, the value of the additional 

death benefit (which is the only 

additional benefit available under the 

contract) is reduced by an amount that 

is at least proportional to the reduction 

in the notional account value and, at age 

78 and 9 months, the sum of the 

notional account value (dollar amount 

credited to the employee under the 

contract) and the actuarial present value 

of the additional death benefit is no 

more than 120 percent of the notional 

account value, the exclusion under 

paragraph (m)(2)(iii)(B) of this section is 

applicable for 2029. Therefore, for 

purposes of applying the rules in 

§ 1.401(a)(9)–5, the entire interest under 

Contract S may be determined as the 

notional account value (that is, without 

regard to the additional death benefit). 

(ii) Example 2—(A) Facts. The facts 

are the same as in Example 1 in 

paragraph (m)(4)(i) of this section except 

that the notional account value is 

$550,000 at the end of 2028. In this 

instance, the actuarial present value of 

the death benefit in excess of the 

notional account value in 2028 is 

determined to be $97,273 (24 percent of 

the notional account value). The 

following two tables summarize the 

actuarial methodology used in 

determining the actuarial present value 

of the additional benefit. 

TABLE 4—APPLICABLE TO PARAGRAPH (m)(4)(ii)(A) 

Year 

Death 

benefit 

during 

year 

End-of-year 

notional 

account 

before 

withdrawal 

Average 

notional 

account 

Withdrawal 

at end 

of year 

End-of-year 

notional 

account 

after 

withdrawal 

2028 ..................................................................................... $1,000,000 ........................ ........................ ........................ $400,000 

2029 ..................................................................................... 954,545 $408,000 $404,000 $18,957 389,043 

2030 ..................................................................................... 909,306 396,824 392,933 19,260 377,564

2031 ..................................................................................... 864,291 385,115 381,339 19,462 365,653

2032 ..................................................................................... 819,740 372,966 369,310 19,765 353,201

2033 ..................................................................................... 775,430 360,265 356,733 19,955 340,310

2034 ..................................................................................... 731,620 347,116 343,713 20,257 326,859

TABLE 5—APPLICABLE TO PARAGRAPH (m)(4)(ii)(A) 

Year 

Survivorship 

to start 

of year 

Interest 

discount 

to end 

of 2028 

Mortality 

rate during 

year 

Discounted 

additional 

benefits 

within year 

2028 ................................................................................................................. ........................ ........................ ........................ ........................

2029 ................................................................................................................. 1.00000 .97590 .03321 $17,843 

2030 ................................................................................................................. .96679 .92943 .03739 17,349 

2031 ................................................................................................................. .93064 .88517 .04198 16,701 

2032 ................................................................................................................. .89157 .84302 .04715 15,963 

2033 ................................................................................................................. .84953 .80288 .05305 15,150 

2034 ................................................................................................................. .80446 .76464 .05979 14,267 

........................ ........................ ........................ 97,273 

(B) Conclusion. Because the sum of 

the notional account balance and the 

actuarial present value of the additional 

death benefit is more than 120 percent 

of the notional account value, the 

exclusion under paragraph (m)(3)(i) of 

this section does not apply for 2029. 

Therefore, for purposes of applying the 

rules in § 1.401(a)(9)–5, the entire 

interest under Contract S must include 

the actuarial present value of the 

additional death benefit. 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10543 

(n) Change in annuity payment 

period—(1) In general. An annuity 

payment period may be changed in 

accordance with the reannuitization 

provisions set forth in paragraph (n)(2) 

of this section or in association with an 

annuity payment increase described in 

paragraph (o) of this section. 

(2) Reannuitization. If, in a stream of 

annuity payments that otherwise 

satisfies section 401(a)(9), the annuity 

payment period is changed and the 

annuity payments are modified in 

association with that change, this 

modification will not cause the 

distributions to fail to satisfy section 

401(a)(9) provided the conditions set 

forth in paragraph (n)(3) of this section 

are satisfied, and— 

(i) The modification occurs at the time 

that the employee retires or in 

connection with a plan termination; 

(ii) The annuity payments prior to 

modification are annuity payments paid 

over a period certain without life 

contingencies; or 

(iii) The annuity payments after 

modification are paid under a qualified 

joint and survivor annuity over the joint 

lives of the employee and a designated 

beneficiary, the employee’s spouse is 

the sole beneficiary, and the 

modification occurs in connection with 

the employee becoming married to that 

spouse. 

(3) Conditions. In order to modify a 

stream of annuity payments in 

accordance with paragraph (n)(2) of this 

section, the following conditions must 

be satisfied— 

(i) The future payments under the 

modified stream satisfy section 401(a)(9) 

and this section (determined by treating 

the date of the change as a new annuity 

starting date and the actuarial present 

value of the remaining payments prior 

to modification as the entire interest of 

the participant); 

(ii) For purposes of sections 415 and 

417, the modification is treated as a new 

annuity starting date; 

(iii) After taking into account the 

modification, the annuity stream 

satisfies section 415 (determined at the 

original annuity starting date, using the 

interest rates and mortality tables 

applicable to that date); and 

(iv) The end point of the period 

certain, if any, for any modified 

payment period is not later than the end 

point available under section 401(a)(9) 

to the employee at the original annuity 

starting date. 

(4) Examples. For the purposes of the 

examples in this paragraph (n)(4), 

assume that the applicable segment 

rates under section 417(e)(3) are 1.00%, 

3.00%, and 4.00%, and the Applicable 

Mortality Table under section 417(e)(3) 

is the mortality table provided in Notice 

2020–85, 2020–51 I.R.B. 1645. In 

addition, assume that the section 415 

limit at age 72 for a straight life annuity 

is $280,000 (which is the lesser of the 

annual benefit under section 

415(b)(1)(A), as adjusted pursuant to 

section 415(d) and further adjusted for 

age 72 in accordance with § 1.415(b)– 

1(e)(1)(i), and 100% of the participant’s 

average compensation for the 

participant’s high 3 years): 

(i) Example 1—(A) Facts—(1) 

Background. Participant D has 10 years 

of participation in a frozen defined 

benefit plan (Plan W). D is not retired 

and elects to receive distributions from 

Plan W in the form of a straight life (that 

is level payment) annuity with annual 

payments of $215,000 per year 

beginning in 2025 at a date when D has 

an attained age of 72. Plan W offers nonretired employees in pay status the 

opportunity to modify their annuity 

payments due to an associated change 

in the payment period at retirement. 

Plan W treats the date of the change in 

payment period as a new annuity 

starting date for purposes of sections 

415 and 417. Thus, for example, the 

plan provides a new qualified and joint 

survivor annuity election and obtains 

spousal consent. Plan W determines 

modifications of annuity payment 

amounts at retirement so that the 

present value of future new annuity 

payment amounts (taking into account 

the new associated payment period) is 

actuarially equivalent to the present 

value of future pre-modification annuity 

payments (taking into account the premodification annuity payment period). 

Actuarial equivalency for this purpose 

is determined using the applicable 

segment rates under section 417(e)(3)(C) 

and the Applicable Mortality Table as of 

the date of modification. 

(2) Payment of retirement benefits to 

Participant D. D retires in 2029 at the 

age of 76 and, after receiving four 

annual payments of $215,000, elects to 

receive the remaining distributions from 

Plan W in the form of an immediate 

final lump sum payment of $2,316,180. 

Because payment of retirement benefits 

in the form of an immediate final lump 

sum payment satisfies (in terms of form) 

section 401(a)(9), the condition under 

paragraph (n)(3)(i) of this section is met. 

(B) Analysis. Because Plan W treats a 

modification of an annuity payment 

stream at retirement as a new annuity 

starting date for purposes of sections 

415 and 417, the condition under 

paragraph (n)(3)(ii) of this section is 

met. After taking into account the 

modification, the annuity stream 

determined as of the original annuity 

starting date consists of annual 

payments beginning at age 72 of 

$215,000, $215,000, $215,000, $215,000, 

and $2,316,180. This benefit stream is 

actuarially equivalent to a straight life 

annuity at age 72 of $276,768, 

calculated in accordance with section 

415(b)(2)(E)(ii), which is an amount less 

than the section 415 limit determined at 

the original annuity starting date. Thus, 

the condition under paragraph (n)(3)(iii) 

of this section is met. 

(C) Conclusion. Because a stream of 

annuity payments in the form of a 

straight life annuity satisfies section 

401(a)(9), and because each of the 

conditions under paragraph (n)(3) of 

this section are satisfied, the 

modification of annuity payments to D 

described in this example meets the 

requirements of this paragraph (n). 

(ii) Example 2—(A) Facts. The facts 

are the same as in Example 1 in 

paragraph (n)(4)(i) of this section except 

that the straight life annuity payments 

are paid at a rate of $230,000 per year 

and after D retires the lump sum 

payment at age 76 is $2,477,774. Thus, 

after taking into account the 

modification, the annuity stream 

determined as of the original annuity 

starting date consists of annual 

payments beginning at age 72 of 

$230,000, $230,000, $230,000, $230,000, 

and $2,477,774. 

(B) Conclusion. The benefit stream 

described in paragraph (n)(4)(ii)(A) of 

this section is actuarially equivalent to 

a straight life annuity at age 72 of 

$296,078, calculated in accordance with 

section 415(b)(2)(E)(ii), which exceeds 

the section 415 limit determined at the 

original annuity starting date. Thus, the 

lump sum payment to D fails to satisfy 

the condition under paragraph (n)(3)(iii) 

of this section. Therefore, the lump sum 

payment to D fails to meet the 

requirements of this paragraph (n) and 

fails to satisfy the requirements of 

section 401(a)(9). 

(iii) Example 3—(A) Facts—(1) 

Background. Participant E has 10 years 

of participation in Plan X, a frozen 

defined benefit plan. E retires in 2025 at 

a date when E’s attained age is 72. E 

elects to receive annual distributions 

from Plan X in the form of a 27-year 

period certain annuity (that is, a 27-year 

annuity payment period without a life 

contingency) paid at a rate of $37,000 

per year beginning in 2025 with future 

payments increasing at a rate of 4.00% 

per year (that is, the 2026 payment will 

be $38,480, the 2027 payment will be 

$40,019 and so on). Plan X offers 

participants in pay status whose annuity 

payments are in the form of a termcertain annuity the opportunity to 

modify their payment period at any time 

and treats the modifications as a new 


jspears on DSK121TN23PROD with PROPOSALS3
10544 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

annuity starting date for the purposes of 

sections 415 and 417. Thus, for 

example, the plan provides a new 

qualified and joint survivor annuity 

election and obtains spousal consent. 

(2) Plan provisions for determination 

of actuarial equivalence. Plan X 

determines modifications of annuity 

payment amounts so that the present 

value of future new annuity payment 

amounts (taking into account the new 

associated payment period) is 

actuarially equivalent to the present 

value of future pre-modification annuity 

payments (taking into account the premodification annuity payment period). 

Actuarial equivalency for this purpose 

is determined using 5.00% and the 

Applicable Mortality Table as of the 

date of modification. 

(3) Modification of retirement benefits 

paid to Participant E. In 2028, E, after 

receiving annual payments of $37,000, 

$38,480, and $40,019, elects to receive 

the remaining distributions from Plan W 

in the form of a straight life annuity 

paid with annual payments of $92,133 

per year. 

(B) Analysis. Because payment of 

retirement benefits in the form of a 

straight life annuity satisfies (in terms of 

form) section 401(a)(9), the condition 

under paragraph (n)(3)(i) of this section 

is met. Because Plan X treats a 

modification of an annuity payment 

stream at retirement as a new annuity 

starting date for purposes of sections 

415 and 417, the condition under 

paragraph (n)(3)(ii) of this section is 

met. After taking into account the 

modification, the annuity stream 

determined as of the original annuity 

starting date consists of annual 

payments beginning at age 72 of 

$37,000, $38,480, and $40,019, and a 

straight life annuity beginning at age 75 

of $92,133. This benefit stream is 

actuarially equivalent to a straight life 

annuity at age 72 of $81,940, calculated 

in accordance with section 

415(b)(2)(E)(i), which is an amount less 

than the section 415 limit determined at 

the original annuity starting date. Thus, 

the condition under paragraph (n)(3)(iii) 

of this section is met. 

(C) Conclusion. Because a stream of 

annuity payments in the form of a 

straight life annuity satisfies section 

401(a)(9), and each of the conditions 

under paragraph (n)(3) of this section 

are satisfied, the modification of annuity 

payments to E meets the requirements of 

this paragraph (n). 

(o) Increase in annuity payments—(1) 

General rules. Notwithstanding the 

general rule under paragraph (a)(1) of 

this section prohibiting increases in 

annuity payments, the following 

increases in annuity payments are 

permitted— 

(i) An annual percentage increase that 

does not exceed the percentage increase 

in an eligible cost-of-living index (as 

defined in paragraph (o)(2) of this 

section) for a 12-month period ending in 

the year during which the increase 

occurs or the prior year; 

(ii) A percentage increase that occurs 

at specified times (for example, at 

specified ages) and does not exceed the 

cumulative total of annual percentage 

increases in an eligible cost-of-living 

index (as defined in paragraph (o)(2) of 

this section) after the annuity starting 

date, or if later, the date of the most 

recent percentage increase; 

(iii) An increase eliminating some or 

all of the reduction in the amount of the 

employee’s payments to provide for a 

survivor benefit, but only if there is no 

longer a survivor benefit because the 

beneficiary whose life was being used to 

determine the period described in 

section 401(a)(9)(A)(ii) over which 

payments were being made dies or is no 

longer the employee’s beneficiary 

pursuant to a qualified domestic 

relations order within the meaning of 

section 414(p); 

(iv) An increase to pay increased 

benefits that result from a plan 

amendment; 

(v) An increase to allow a beneficiary 

to convert the survivor portion of a joint 

and survivor annuity into a single-sum 

distribution upon the employee’s death; 

(vi) An increase to the extent 

permitted in accordance with paragraph 

(o)(3), (4), or (5) of this section; or 

(vii) An increase resulting from the 

resumption of benefits that were 

suspended pursuant to section 

411(a)(3)(B), section 418E, or section 

432(e)(9). 

(2) Eligible cost of living index—(i) In 

general. For purposes of this paragraph 

(o), an eligible cost-of-living index 

means an index described in paragraph 

(o)(2)(ii), (iii), or (iv) of this section. 

(ii) Consumer Price Index. An index is 

described in this paragraph (o)(2)(ii) if it 

is a consumer price index that is based 

on prices of all items (or all items 

excluding food and energy) and issued 

by the Bureau of Labor Statistics, 

including an index for a specific 

population (for example, urban 

consumers or urban wage earners and 

clerical workers) and an index for a 

geographic area or areas (for example, a 

metropolitan area or State). 

(iii) Consumer price index with 

banking. An index is described in this 

paragraph (o)(2)(iii) if it is a percentage 

adjustment based on a cost-of-living 

index described in paragraph (o)(2)(ii) of 

this section, or a fixed percentage if less. 

In any year when the cost-of-living 

index is lower than the fixed 

percentage, the fixed percentage may be 

treated as an increase in an eligible costof-living index, provided it does not 

exceed the sum of— 

(A) The cost-of-living index for that 

year, and 

(B) The accumulated excess of the 

annual cost-of-living index from each 

prior year over the fixed annual 

percentage used in that year (reduced by 

any amount previously utilized under 

this paragraph (o)(2)(iii)(B)). 

(iv) Adjustment based on 

compensation for position. An index is 

described in this paragraph (o)(2)(iv) if 

it is a percentage adjustment based on 

the increase in compensation for the 

position held by the employee at the 

time of retirement, and provided under 

either— 

(A) The terms of a governmental plan 

(within the meaning of section 414(d)), 

or 

(B) The terms of a nongovernmental 

plan, as in effect on April 17, 2002. 

(3) Additional permitted increases for 

certain annuity contracts purchased 

from insurance companies. In the case 

of payments paid from an annuity 

contract purchased from an insurance 

company, if the total future expected 

payments (determined in accordance 

with paragraph (o)(6)(iii) of this section) 

exceed the total value being annuitized 

(within the meaning of paragraph 

(o)(6)(i) of this section), the payments 

under the contract will not fail to satisfy 

the nonincreasing payment requirement 

in paragraph (a)(1) of this section merely 

because the payments are increased in 

accordance with one or more of the 

following— 

(i) By a constant percentage, applied 

not less frequently than annually; 

(ii) As a result of dividend payments 

or other payments that result from 

actuarial gains (within the meaning of 

paragraph (o)(6)(ii) of this section), but 

only if actuarial gain is measured no 

less frequently than annually and the 

resulting dividend payments or other 

payments are either paid no later than 

the year following the year for which 

the actuarial experience is measured or 

paid in the same form as the payment 

of the annuity over the remaining period 

of the annuity (beginning no later than 

the year following the year for which 

the actuarial experience is measured); 

and 

(iii) An acceleration of payments 

under the annuity (within the meaning 

of paragraph (o)(6)(iv) of this section). 

(4) Additional permitted increases for 

all annuity contracts purchased from 

insurance companies. Payments made 

from an annuity contract purchased 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10545 

from an insurance company will not fail 

to satisfy the nonincreasing payment 

requirement in paragraph (a)(1) of this 

section merely because the payments 

are increased in accordance with one or 

more of the following— 

(i) To provide a final payment upon 

the death of the employee that does not 

exceed the excess of total value being 

annuitized (within the meaning of 

paragraph (a)(5)(i) of this section) over 

the total of payments before the death of 

the employee; 

(ii) To provide an acceleration of 

payments (within the meaning of 

paragraph (o)(6)(iv) of this section) that 

is required to comply with § 1.401(a)(9)– 

5(e); or 

(iii) To provide a short-term 

acceleration of payments under the 

annuity, under which up to one year of 

annuity payments that would otherwise 

satisfy the requirements of this section 

are paid in advance of when the 

payments were scheduled to be made. 

(5) Additional permitted increases for 

annuity payments from a qualified trust. 

Annuity payments made under a 

defined benefit plan qualified under 

section 401(a) (other than annuity 

payments under an annuity contract 

purchased from an insurance company 

that satisfy paragraph (a)(3) of this 

section) will not fail to satisfy the 

nonincreasing payment requirement in 

paragraph (a)(1) of this section merely 

because the payments are increased in 

accordance with one of the following— 

(i) By a constant percentage, applied 

not less frequently than annually, at a 

rate that is less than 5 percent per year; 

(ii) To provide a final payment upon 

the death of the employee that does not 

exceed the excess of the actuarial 

present value of the employee’s accrued 

benefit (within the meaning of section 

411(a)(7)) calculated as of the annuity 

starting date using the applicable 

interest rate and the applicable 

mortality table under section 417(e) (or, 

if greater, the total amount of employee 

contributions plus interest) over the 

total of payments before the death of the 

employee; or 

(iii) As a result of dividend payments 

or other payments that result from 

actuarial gains (within the meaning of 

paragraph (o)(6)(ii) of this section), but 

only if— 

(A) Actuarial gain is measured no less 

frequently than annually; 

(B) The resulting dividend payments 

or other payments are either paid no 

later than the year following the year for 

which the actuarial experience is 

measured or paid in the same form as 

the payment of the annuity over the 

remaining period of the annuity 

(beginning no later than the year 

following the year for which the 

actuarial experience is measured); 

(C) The actuarial gain taken into 

account is limited to the actuarial gain 

from investment experience; 

(D) The assumed interest used to 

calculate actuarial gains is not less than 

3 percent; and 

(E) The payments are not increasing 

by a constant percentage as described in 

paragraph (o)(5)(i) of this section. 

(6) Definitions. For purposes of this 

paragraph (o), the following definitions 

apply— 

(i) Total value being annuitized. Total 

value being annuitized means: 

(A) In the case of annuity payments 

under a section 403(a) annuity plan or 

under a deferred annuity purchased by 

a section 401(a) trust, the value of the 

employee’s entire interest (within the 

meaning of paragraph (m) of this 

section) being annuitized (valued as of 

the date the contract is annuitized); 

(B) In the case of annuity payments 

under an immediate annuity contract 

purchased by a trust for a defined 

benefit plan qualified under section 

401(a), the amount of the premium used 

to purchase the contract; and 

(C) In the case of a defined 

contribution plan, the value of the 

employee’s account balance used to 

purchase an immediate annuity under 

the contract. 

(ii) Actuarial gain. Actuarial gain 

means the difference between an 

amount determined using the actuarial 

assumptions (that is, investment return, 

mortality, expense, and other similar 

assumptions) used to calculate the 

initial payments before adjustment for 

any increases and the amount 

determined under the actual experience 

with respect to those factors. Actuarial 

gain also includes differences between 

the amount determined using actuarial 

assumptions when an annuity was 

purchased or commenced, and the 

amount determined using actuarial 

assumptions used in calculating 

payments at the time the actuarial gain 

is determined. 

(iii) Total future expected payments. 

Total future expected payments means 

the total future payments expected to be 

made under the annuity contract as of 

the date the contract is annuitized, 

based on the mortality rates contained 

in § 1.401(a)(9)–9(e). 

(iv) Acceleration of payments. 

Acceleration of payments means a 

shortening of the payment period with 

respect to an annuity or a full or partial 

commutation of the future annuity 

payments. An increase in the payment 

amount will be treated as an 

acceleration of payments in the annuity 

only if the total future expected 

payments under the annuity (including 

the amount of any payment made as a 

result of the acceleration) is decreased 

as a result of the change in payment 

period. 

(7) Examples. This paragraph (o) is 

illustrated by the following examples. 

(i) Example 1. Variable annuity—(A) 

Facts. A retired participant (Z1) in Plan 

X, a defined contribution plan, attains 

age 72 in 2021. Z1 elects to purchase 

Contract Y1 from Insurance Company W 

in 2021. Contract Y1 is a single life 

annuity contract with a 10-year period 

certain. Contract Y1 provides for an 

initial annual payment calculated with 

an assumed interest rate (AIR) of 3 

percent. Subsequent payments are 

determined by multiplying the prior 

year’s payment by a fraction, the 

numerator of which is 1 plus the actual 

return on the separate account assets 

underlying Contract Y1 since the 

preceding payment and the 

denominator of which is 1 plus the AIR 

during that period. The value of Z1’s 

account balance in Plan X at the time of 

purchase is $105,000, and the purchase 

price of Contract Y1 is $105,000. 

Contract Y1 provides Z1 with an initial 

payment of $7,200 at the time of 

purchase in 2021. 

(B) Conclusion. Based on the 

mortality rates in § 1.401(a)(9)–9(e), the 

total future expected payments to Z1 

under Contract Y1 are $128,880. 

Because the total future expected 

payments on the date the contract is 

annuitized exceed the total value being 

annuitized and payments increase only 

as a result of actuarial gain, with 

increases from actuarial gain, beginning 

no later than the next year, paid in the 

same form as the payment of the 

annuity over the remaining period of the 

annuity, distributions received by Z1 

from Contract Y1 meet the requirements 

of paragraph (o)(3)(ii) of this section. 

(ii) Example 2. Participating 

annuity—(A) Facts. A retired 

participant (Z2) in Plan X, a defined 

contribution plan, attains age 72 in 

2021. Z2 elects to purchase Contract Y2 

from Insurance Company W in 2021. 

Contract Y2 is a participating single life 

annuity contract with a 10-year period 

certain. Contract Y2 provides for level 

annual payments with dividends paid 

in a lump sum in the year after the year 

for which the actuarial experience is 

measured or paid out levelly beginning 

in the year after the year for which the 

actuarial gain is measured over the 

remaining lifetime and period certain, 

that is, the period certain ends at the 

same time as the original period certain. 

Dividends are determined annually by 

the Board of Directors of Company W 

based upon a comparison of actual 


jspears on DSK121TN23PROD with PROPOSALS3
10546 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

actuarial experience to expected 

actuarial experience in the past year. 

The value of Z2’s account balance in 

Plan X at the time of purchase is 

$265,000, and the purchase price of 

Contract Y2 is $265,000. Contract Y2 

provides Z2 with an initial payment of 

$16,000 in 2021. Based on the mortality 

rates in § 1.401(a)(9)–9(e), the total 

future expected payments to Z2 under 

Contract Y2 are $286,400. 

(B) Conclusion. Because the total 

future expected payments on the date 

the contract is annuitized exceed the 

total value being annuitized and 

payments increase only as a result of 

actuarial gain, with those increases, 

beginning no later than the next year, 

paid in the same form as the payment 

of the annuity over the remaining period 

of the annuity, distributions received by 

Z2 from Contract Y2 meet the 

requirements of paragraph (o)(3)(ii) of 

this section. 

(iii) Example 3. Participating annuity 

with dividend accumulation—(A) Facts. 

The facts are the same as in Example 2 

in paragraph (o)(7)(ii) of this section 

except that the annuity provides a 

dividend accumulation option under 

which Z2 may defer receipt of the 

dividends to a time selected by Z2. 

(B) Conclusion. Because the dividend 

accumulation option permits dividends 

to be paid later than the end of the year 

following the year for which the 

actuarial experience is measured or as a 

stream of payments that increase only as 

a result of actuarial gain, with those 

increases beginning no later than the 

next year, paid in the same form as the 

payment of the annuity in Example 2 in 

paragraph (o)(7)(ii) of this section over 

the remaining period of the annuity, the 

dividend accumulation option does not 

meet the requirements of paragraph 

(o)(3)(ii) of this section. Neither does the 

dividend accumulation option fit within 

any of the other permissible increases 

described in paragraph (o)(3) of this 

section. Accordingly, the dividend 

accumulation option causes the 

contract, and consequently any 

distributions from the contract, to fail to 

meet the requirements of this paragraph 

(o) and thus to fail to satisfy the 

requirements of section 401(a)(9). 

(iv) Example 4. Participating annuity 

with dividends used to purchase 

additional death benefits—(A) Facts. 

The facts are the same as in Example 2 

in paragraph (o)(7)(ii) of this section, 

except that the annuity provides an 

option under which actuarial gain under 

the contract is used to provide 

additional death benefit protection for 

Z2. 

(B) Conclusion. Because this option 

permits payments as a result of actuarial 

gain to be paid later than the end of the 

year following the year for which the 

actuarial experience is measured or as a 

stream of payments that only increase as 

a result of actuarial gain, with increases 

as a result of actuarial gain beginning no 

later than the next year, paid in the 

same form as the payment of the 

annuity described in Example 2 in 

paragraph (o)(7)(ii) of this section over 

the remaining period of the annuity, the 

option does not meet the requirements 

of paragraph (o)(3)(ii) of this section. 

Neither does the option fit within any 

of the other permissible increases 

described in paragraph (o)(3) of this 

section. Accordingly, the addition of the 

option causes the contract, and 

consequently any distributions from the 

contract, to fail to meet the requirements 

of this paragraph (o) and thus to fail to 

satisfy the requirements of section 

401(a)(9). 

(v) Example 5. Annuity with a fixed 

percentage increase—(A) Facts. A 

retired participant (Z3) in Plan X, a 

defined contribution plan, attains age 72 

in 2021. Z3 elects to purchase Contract 

Y3 from Insurance Company W. 

Contract Y3 is a single life annuity 

contract with a 20-year period certain 

(which does not exceed the maximum 

period certain permitted under 

paragraph (c)(1) of this section) with 

fixed annual payments increasing 3 

percent each year. The value of Z3’s 

account balance in Plan X at the time of 

purchase is $110,000, and the purchase 

price of Contract Y3 is $110,000. 

Contract Y3 provides Z3 with an initial 

payment of $6,000 at the time of 

purchase in 2021. Based on the 

mortality rates in § 1.401(a)(9)–9(e), the 

total future expected payments to Z3 

under Contract Y3 are $129,600. 

(B) Conclusion. Because the total 

future expected payments on the date 

the contract is annuitized exceed the 

total value being annuitized and 

payments increase only as a constant 

percentage applied not less frequently 

than annually, distributions received by 

Z3 from Contract Y3 meet the 

requirements of paragraph (o)(3)(i) of 

this section. 

(vi) Example 6. Annuity with 

excessive percentage increase—(A) 

Facts. The facts are the same as in 

Example 5 in paragraph (o)(7)(v) of this 

section except that the initial payment 

is $5,000 and the annual rate of increase 

is 4 percent. In this example, based on 

the mortality rates in § 1.401(a)(9)–9(e), 

the total future expected payments are 

$108,000. 

(B) Conclusion. Because the total 

future expected payments are less than 

the total value being annuitized (the 

$110,000 used to purchase Contract Y3), 

distributions received by Z3 do not meet 

the requirements of paragraph (o)(3) of 

this section, and thus fail to meet the 

requirements of section 401(a)(9). 

(vii) Example 7. Annuity with full 

commutation feature—(A) Facts. A 

retired participant (Z4) in Plan X, a 

defined contribution plan, attains age 78 

in 2021. Z4 elects to purchase Contract 

Y4 from Insurance Company W. 

Contract Y4 provides for a single life 

annuity with a 10-year period certain 

(which does not exceed the maximum 

period certain permitted under 

paragraph (c) of this section) with 

annual payments. Contract Y4 provides 

that Z4 may cancel Contract Y4 at any 

time before Z4 attains age 84, and 

receive, on the next payment due date, 

a final payment in an amount 

determined by multiplying the initial 

payment amount by a factor obtained 

from Table M of Contract Y4 using Z4’s 

age as of Z4’s birthday in the calendar 

year of the final payment. The value of 

Z4’s account balance in Plan X at the 

time of purchase is $450,000, and the 

purchase price of Contract Y4 is 

$450,000. Contract Y4 provides Z4 with 

an initial payment in 2021 of $40,000. 

The factors in Table M are as follows: 

TABLE 6—APPLICABLE TO PARAGRAPH

(o)(7)(vii)(A) 

Age at final payment Factor 

79 10.5 

80 10.0 

81 9.5 

82 9.0 

83 8.5 

84 8.0 

(B) Determination of acceleration of 

payments. Based on the mortality rates 

in § 1.401(a)(9)–9(e), the total future 

expected payments to Z4 under Contract 

Y4 are $560,000. Because the total 

future expected payments on the 

purchase date exceed the total value 

being annuitized (that is, the $450,000 

used to purchase Contract Y4), the 

permitted increases set forth in 

paragraph (o)(3) of this section are 

available. Furthermore, because the 

factors in Table M are less than the 

present value factors at each of the ages 

based on the mortality rates in 

§ 1.401(a)(9)–9(e), the final payment is 

always less than the total future 

expected payments. Thus, the final 

payment is an acceleration of payments 

within the meaning of paragraph 

(o)(3)(iii) of this section. 

(C) Application to cancellation 

immediately before attainment of age 

84. As an illustration of paragraph 

(o)(7)(vii)(B) of this section, if 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10547 

Participant Z4 were to elect to cancel 

Contract Y4 on the day before Z4 was 

to attain age 84, the contractual final 

payment would be $320,000. This 

amount is determined as $40,000 (the 

annual payment amount due under 

Contract Y4) multiplied by 8.0 (the 

factor in Table M for the next payment 

due date, age 84). Based on the mortality 

rates in § 1.401(a)(9)–9(e), the total 

future expected payments under 

Contract Y4 at age 84 before the final 

payment is $360,000. Because $320,000 

(the contractual final payment) is less 

than $360,000 (the total future expected 

payments under the annuity contract, 

determined before the election), the 

final payment is an acceleration of 

payments within the meaning of 

paragraph (o)(3)(iii) of this section. 

(viii) Example 8. Annuity with partial 

commutation feature—(A) Facts. The 

facts are the same as in Example 7 in 

paragraph (o)(7)(vii) of this section 

except that the annuity provides that Z4 

may request, at any time before Z4 

attains age 84, an ad hoc payment on his 

next payment due date with future 

payments reduced by an amount equal 

to the ad hoc payment divided by the 

factor obtained from Table M (from 

paragraph (o)(7)(vii) of this section) 

corresponding to Z4’s age at the time of 

the ad hoc payment. 

(B) Analysis and conclusion. Because, 

at each age, the factors in Table M are 

less than the corresponding present 

value factors based on the mortality 

rates in § 1.401(a)(9)–9(e), total future 

expected payments under Contract Y4 

will decrease after an ad hoc payment. 

Thus, ad hoc distributions received by 

Z4 from Contract Y4 will satisfy the 

requirements of paragraph (o)(3)(iii) of 

this section. 

(C) Application to ad hoc payment 

received immediately before attainment 

of age 84. As an illustration of 

paragraph (o)(7)(viii)(A) of this section, 

if Z4 were to request, on the day before 

Z4 was to attain age 84, an ad hoc 

payment of $100,000 on the next 

payment due date, the recalculated 

annual payment amount would be 

reduced to $27,500. This amount is 

determined as $40,000 (the amount of 

Z4’s next annual payment) reduced by 

$12,500 (the $100,000 ad hoc payment 

divided by the Table M factor at age 84 

of 8.0). Thus, Z4’s total future expected 

payments after the ad hoc payment (and 

including the $100,000 ad hoc 

payment), based on the mortality rates 

in § 1.401(a)(9)–9(e), are equal to 

$347,500. Note that this $347,500 

amount is less than the amount of Z4’s 

total future expected payments before 

the ad hoc payment, based on the 

mortality rates in § 1.401(a)(9)–9(e), of 

$360,000, and the requirements of 

paragraph (o)(3)(iii) of this section are 

satisfied. 

(ix) Example 9. Annuity with 

backloaded increases—(A) Facts. A 

retired participant (Z5) in Plan X, a 

defined contribution plan, attains age 72 

in 2021. Z5 elects to purchase annuity 

Contract Y5 from Insurance Company W 

in 2021 with a premium of $1,000,000. 

Contract Y5 is a single life annuity 

contract with a 20-year period certain. 

Contract Y5 provides for an initial 

payment of $200,000, a second payment 

one year from the time of purchase of 

$38,000, and 18 succeeding annual 

payments, each increasing at a constant 

percentage rate of 4.5 percent from the 

preceding payment. 

(B) Conclusion. Contract Y5 fails to 

meet the requirements of section 

401(a)(9) because the total future 

expected payments without regard to 

any increases in the annuity payment, 

based on the mortality rates in 

§ 1.401(a)(9)–9(e), are only $982,800 

(that is, an amount that does not exceed 

the total value used to purchase the 

annuity). 

(p) Payments to children—(1) In 

general. Payments under a defined 

benefit plan or annuity contract that are 

made to an employee’s child until the 

child reaches the age of majority as 

provided in paragraph (p)(2) of this 

section (or dies, if earlier) may be 

treated, for purposes of section 

401(a)(9), as if the payments under the 

defined benefit plan or annuity contract 

were made to the surviving spouse to 

the extent they become payable to the 

surviving spouse upon cessation of the 

payments to the child. Thus, when 

payments described in this paragraph 

(p)(1) become payable to the surviving 

spouse because the child attains the age 

of majority, there is not an increase in 

benefits under paragraph (a) of this 

section. Likewise, the age of the child 

receiving the payments described in this 

paragraph (p)(1) is not taken into 

consideration for purposes of the MDIB 

requirement of paragraph (b) of this 

section. 

(2) Age of majority—(i) General rule. 

Except as provided in paragraph 

(p)(2)(ii) of this section, the 

determination of when an employee’s 

child attains the age of majority is made 

under the rules of § 1.401(a)(9)–4(e)(3). 

(ii) Exception for preexisting plan 

terms. A defined benefit plan may apply 

a definition of the age of majority other 

than the definition in paragraph (p)(2)(i) 

of this section, but only if the plan terms 

regarding the age of majority— 

(A) Were adopted on or before [DATE 

OF PUBLICATION IN THE Federal 

Register]; and 

(B) Met the requirements of A–15 of 

26 CFR 1.401(a)(9)–6, revised April 1, 

2021. 

(q) Qualifying longevity annuity 

contract—(1) Definition of qualifying 

longevity annuity contract. A qualifying 

longevity annuity contract (QLAC) is an 

annuity contract described in paragraph 

(d) of this section that is purchased from 

an insurance company for an employee 

and that, in accordance with the rules 

of application of paragraph (q)(4) of this 

section, satisfies each of the following 

requirements— 

(i) Premiums for the contract satisfy 

the limitations of paragraph (q)(2) of this 

section; 

(ii) The contract provides that 

distributions under the contract must 

commence not later than a specified 

annuity starting date that is no later 

than the first day of the month next 

following the 85th anniversary of the 

employee’s birth; 

(iii) The contract provides that, after 

distributions under the contract 

commence, those distributions must 

satisfy the requirements of this section 

(other than the requirement in 

paragraph (a)(3) of this section that 

annuity payments commence on or 

before the required beginning date); 

(iv) After the required beginning date, 

the contract does not make available any 

commutation benefit, cash surrender 

right, or other similar feature; 

(v) No benefits are provided under the 

contract after the death of the employee 

other than the benefits described in 

paragraph (q)(3) of this section; 

(vi) When the contract is issued (or 

December 31, 2016, if later), the contract 

(or a rider or endorsement with respect 

to that contract) states that the contract 

is intended to be a QLAC; and 

(vii) The contract is not a variable 

contract under section 817, an indexed 

contract, or a similar contract, except to 

the extent provided by the 

Commissioner in revenue rulings, 

notices, or other guidance published in 

the Internal Revenue Bulletin (see 

§ 601.601(d) of this chapter). 

(2) Limitations on premiums—(i) In 

general. The premiums paid with 

respect to the contract on a date 

(premium payment date) satisfy the 

limitations of this paragraph (q)(2) if 

they do not exceed the lesser of the 

dollar limitation in paragraph (q)(2)(ii) 

of this section or the percentage 

limitation in paragraph (q)(2)(iii) of this 

section. For purposes of this paragraph 

(q)(2)(i), if an insurance contract is 

exchanged for a contract intended to be 

a QLAC, the fair market value of the 

exchanged contract will be treated as a 

premium paid for the QLAC. 


jspears on DSK121TN23PROD with PROPOSALS3
10548 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

(ii) Dollar limitation. The dollar 

limitation as of a premium payment 

date is an amount by which $125,000 

(as adjusted under paragraph 

(q)(4)(ii)(A) of this section), exceeds the 

sum of— 

(A) The premiums paid before that 

date with respect to the contract, and 

(B) The premiums paid on or before 

that date with respect to any other 

contract that is intended to be a QLAC 

and that is purchased for the employee 

under the plan, or any other plan, 

annuity, or account described in section 

401(a), 403(a), 403(b), or 408 or eligible 

governmental plan under section 457(b). 

(iii) Percentage limitation. The 

percentage limitation as of a premium 

payment date is an amount by which 25 

percent of the employee’s account 

balance under the plan (including the 

value of any QLAC held under the plan 

for the employee) as of that date, 

determined in accordance with 

paragraph (q)(4)(iii) of this section, 

exceeds the sum of— 

(A) The premiums paid before that 

date with respect to the contract, and 

(B) The premiums paid on or before 

that date with respect to any other 

contract that is intended to be a QLAC 

and that is held or was purchased for 

the employee under the plan. 

(3) Payments after death of the 

employee—(i) Surviving spouse is sole 

beneficiary—(A) Death on or after 

annuity starting date. If the employee 

dies on or after the annuity starting date 

for the contract and the employee’s 

surviving spouse is the sole beneficiary 

under the contract then, except as 

provided in paragraph (q)(3)(iv) of this 

section, the only benefit permitted to be 

paid after the employee’s death is a life 

annuity payable to the surviving spouse 

under which the periodic annuity 

payment does not exceed 100 percent of 

the periodic annuity payment that is 

payable to the employee. 

(B) Death before annuity starting date. 

If the employee dies before the annuity 

starting date and the employee’s 

surviving spouse is the sole beneficiary 

under the contract then, except as 

provided in paragraph (q)(3)(iv) of this 

section, the only benefit permitted to be 

paid after the employee’s death is a life 

annuity payable to the surviving spouse 

under which the periodic annuity 

payment does not exceed 100 percent of 

the periodic annuity payment that 

would have been payable to the 

employee as of the date that benefits to 

the surviving spouse commence. 

However, the annuity is permitted to 

exceed 100 percent of the periodic 

annuity payment that would have been 

payable to the employee to the extent 

necessary to satisfy the requirement to 

provide a qualified preretirement 

survivor annuity (as defined under 

section 417(c)(2) of the Code or section 

205(e)(2) of the Employee Retirement 

Income Security Act of 1974, Public 

Law 93–406 (ERISA), pursuant to 

section 401(a)(11)(A)(ii) of the Code or 

section 205(a)(2) of ERISA). Any life 

annuity payable to the surviving spouse 

under this paragraph (q)(3)(i)(B) must 

commence no later than the date on 

which the annuity payable to the 

employee would have commenced 

under the contract if the employee had 

not died. 

(ii) Surviving spouse is not sole 

beneficiary—(A) Death on or after 

annuity starting date. If the employee 

dies on or after the annuity starting date 

for the contract and the employee’s 

surviving spouse is not the sole 

beneficiary under the contract then, 

except as provided in paragraph 

(q)(3)(iv) of this section, the only benefit 

permitted to be paid after the 

employee’s death is a life annuity 

payable to the designated beneficiary 

under which the periodic annuity 

payment does not exceed the applicable 

percentage (determined under 

paragraph (q)(3)(iii) of this section) of 

the periodic annuity payment that is 

payable to the employee. 

(B) Death before annuity starting date. 

If the employee dies before the annuity 

starting date and the employee’s 

surviving spouse is not the sole 

beneficiary under the contract then, 

except as provided in paragraph 

(q)(3)(iv) of this section, the only benefit 

permitted to be paid after the 

employee’s death is a life annuity 

payable to the designated beneficiary 

under which the periodic annuity 

payment is not in excess of the 

applicable percentage (determined 

under paragraph (q)(3)(iii) of this 

section) of the periodic annuity 

payment that would have been payable 

to the employee as of the date that 

benefits to the designated beneficiary 

commence under this paragraph 

(q)(3)(ii)(B). In any case in which the 

employee dies before the annuity 

starting date, any life annuity payable to 

a designated beneficiary under this 

paragraph (q)(3)(ii)(B) must commence 

by the last day of the calendar year 

following the calendar year of the 

employee’s death. 

(A) Designated beneficiary who is not 

an eligible designated beneficiary. 

Benefits paid to a designated beneficiary 

under this paragraph (q)(3)(ii) must 

satisfy the rules of section 401(a)(9)(H) 

and § 1.401(a)(9)–5(e). 

(iii) Applicable percentage—(A) 

Contracts without pre-annuity starting 

date death benefits. If, as described in 

paragraph (q)(3)(iii)(E) of this section, 

the contract does not provide for a preannuity starting date non-spousal death 

benefit, the applicable percentage is the 

percentage described in the table in 

paragraph (b)(3) of this section. 

(B) Contracts with set beneficiary 

designation. If the contract provides for 

a set non-spousal beneficiary 

designation as described in paragraph 

(q)(3)(iii)(F) of this section (and is not a 

contract described in paragraph 

(q)(3)(iii)(E) of this section), the 

applicable percentage is the percentage 

described in the table set forth in 

paragraph (q)(3)(iii)(D) of this section. 

(C) Contracts providing for return of 

premium. If the contract provides for a 

return of premium as described in 

paragraph (q)(3)(v) of this section, the 

applicable percentage is 0. 

(D) Applicable percentage table. The 

applicable percentage is the percentage 

specified in following table for the 

adjusted employee/beneficiary age 

difference, determined in the same 

manner as in paragraph (b)(2)(iii)(A) of 

this section. 

TABLE 7—APPLICABLE TO PARAGRAPH

(q)(3)(iii)(D) 

Adjusted employee/ 

beneficiary 

age difference 

Applicable 

percentage 

2 years or less ...................... 100 

3 ............................................ 88 

4 ............................................ 78 

5 ............................................ 70 

6 ............................................ 63 

7 ............................................ 57 

8 ............................................ 52 

9 ............................................ 48 

10 .......................................... 44 

11 .......................................... 41 

12 .......................................... 38 

13 .......................................... 36 

14 .......................................... 34 

15 .......................................... 32 

16 .......................................... 30 

17 .......................................... 28 

18 .......................................... 27 

19 .......................................... 26 

20 .......................................... 25 

21 .......................................... 24 

22 .......................................... 23 

23 .......................................... 22 

24 .......................................... 21 

25 and greater ...................... 20 

(E) No pre-annuity starting date nonspousal death benefit. A contract is 

described in this paragraph (q)(3)(iii)(E) 

if the contract provides that no benefit 

may be paid to a beneficiary other than 

the employee’s surviving spouse after 

the employee’s death— 

(1) In any case in which the employee 

dies before the annuity starting date 

under the contract; and 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10549 

(2) In any case in which the employee 

selects an annuity starting date that is 

earlier than the specified annuity 

starting date under the contract and the 

employee dies less than 90 days after 

making that election. 

(F) Contracts permitting set nonspousal beneficiary designation. A 

contract provides for a set non-spousal 

beneficiary designation as described in 

this paragraph (q)(3)(iii)(F) if the 

contract provides that, if the beneficiary 

under the contract is not the employee’s 

surviving spouse, then benefits are 

payable to the beneficiary only if the 

beneficiary was irrevocably designated 

on or before the later of the date of 

purchase or the employee’s required 

beginning date. A contract does not fail 

to be described in the preceding 

sentence merely because the surviving 

spouse becomes the sole beneficiary 

before the annuity starting date. In those 

circumstances, the requirements of 

paragraph (q)(3)(i) of this section apply 

and not the requirements of this 

paragraph (q)(3)(iii). 

(iv) Calculation of early annuity 

payments. For purposes of paragraphs 

(q)(3)(i)(B) and (q)(3)(ii)(B) of this 

section, to the extent the contract does 

not provide an option for the employee 

to select an annuity starting date that is 

earlier than the date on which the 

annuity payable to the employee would 

have commenced under the contract if 

the employee had not died, the contract 

must provide a way to determine the 

periodic annuity payment that would 

have been payable if the employee were 

to have an option to accelerate the 

payments and the payments had 

commenced to the employee 

immediately prior to the date that 

benefit payments to the surviving 

spouse or designated beneficiary 

commence. 

(v) Return of premiums—(A) In 

general. In lieu of a life annuity payable 

to a designated beneficiary under 

paragraph (q)(3)(i) or (ii) of this section, 

a QLAC may provide for a benefit to be 

paid to a beneficiary after the death of 

the employee up to the amount by 

which the premium payments made 

with respect to the QLAC exceed the 

payments already made under the 

QLAC. 

(B) Payments after death of surviving 

spouse. If a QLAC is providing a life 

annuity to a surviving spouse (or will 

provide a life annuity to a surviving 

spouse) under paragraph (q)(3)(i) of this 

section, it may also provide for a benefit 

payable to a beneficiary after the death 

of both the employee and the spouse up 

to the amount by which the premium 

payments made with respect to the 

QLAC exceed the payments already 

made under the QLAC. 

(C) Timing of return of premium 

payment and other rules. A return of 

premium payment under this paragraph 

(q)(3)(v) must be paid no later than the 

end of the calendar year following the 

calendar year in which the employee 

dies. If the employee’s death is after the 

required beginning date, the return of 

premium payment is treated as a 

required minimum distribution for the 

year in which it is paid and is not 

eligible for rollover. If the return of 

premium payment is paid after the 

death of a surviving spouse who is 

receiving a life annuity (or after the 

death of a surviving spouse who has not 

yet commenced receiving a life annuity 

after the death of the employee), the 

return of premium payment under this 

paragraph (q)(3)(v) must be made no 

later than the end of the calendar year 

following the calendar year in which the 

surviving spouse dies. If the surviving 

spouse’s death is after the required 

beginning date for the surviving spouse, 

then the return of premium payment is 

treated as a required minimum 

distribution for the year in which it is 

paid and is not eligible for rollover. 

(vi) Multiple beneficiaries. If an 

employee has more than one designated 

beneficiary under a QLAC, the rules in 

§ 1.401(a)(9)–8(a) apply for purposes of 

paragraphs (q)(3)(i) and (ii) of this 

section. 

(4) Rules of application—(i) Rules 

relating to premiums—(A) Reliance on 

representations. For purposes of the 

limitation on premiums described in 

paragraphs (q)(2)(ii) and (iii) of this 

section, unless the plan administrator 

has actual knowledge to the contrary, 

the plan administrator may rely on an 

employee’s representation (made in 

writing or such other form as may be 

prescribed by the Commissioner) of the 

amount of the premiums described in 

paragraphs (q)(2)(ii)(B) and (q)(2)(iii)(B) 

of this section, but only with respect to 

premiums that are not paid under a 

plan, annuity, or contract that is 

maintained by the employer or an entity 

that is treated as a single employer with 

the employer under section 414(b), (c), 

(m), or (o). 

(B) Consequences of excess premiums 

and correction. If an annuity contract 

fails to be a QLAC solely because a 

premium for the contract exceeds the 

limits under paragraph (q)(2) of this 

section, then the contract is not a QLAC 

beginning on the date on which the 

premium is paid and the value of the 

contract may not be disregarded under 

§ 1.401(a)(9)–5(b)(4) as of the date on 

which the contract ceases to be a QLAC 

(unless the excess premium is returned 

to the non-QLAC portion of the 

employee’s account in accordance with 

the next sentence). However, if the 

excess premium is returned (either in 

cash or in the form of a contract that is 

not intended to be a QLAC) to the nonQLAC portion of the employee’s 

account by the end of the calendar year 

following the calendar year in which the 

excess premium was originally paid, 

then the contract will not be treated as 

exceeding the limits under paragraph 

(q)(2) of this section at any time, and the 

value of the contract will not be 

included in the employee’s account 

balance under § 1.401(a)(9)–5(b)(4). If 

the excess premium (including the fair 

market value of an annuity contract that 

is not intended to be a QLAC, if 

applicable) is returned to the non-QLAC 

portion of the employee’s account after 

the last valuation date for the calendar 

year in which the excess premium was 

originally paid, then the employee’s 

account balance for that calendar year 

must be increased to reflect that excess 

premium in the same manner as an 

employee’s account balance is increased 

under § 1.401(a)(9)–7(b) to reflect a 

rollover received after the last valuation 

date. If the excess premium is returned 

to the non-QLAC portion of the 

employee’s account as described in 

paragraph (q)(4)(ii)(B) of this section, it 

will not be treated as a violation of the 

requirement in paragraph (q)(1)(iv) of 

this section that the contract not provide 

a commutation benefit. 

(C) Application of 25-percent limit. 

For purposes of the 25-percent limit 

under paragraph (q)(2)(iii) of this 

section, an employee’s account balance 

on the date on which premiums for a 

contract are paid is the account balance 

as of the last valuation date preceding 

the date of the premium payment, 

adjusted by— 

(1) Increasing the account balance for 

contributions allocated to the account 

during the period that begins after the 

valuation date and ends before the date 

the premium is paid; and 

(2) Decreasing the account balance for 

distributions made from the account 

during that period. 

(ii) Dollar and age limitations subject 

to adjustments—(A) Dollar limitation. 

The $125,000 amount under paragraph 

(q)(2)(ii) of this section will be adjusted 

at the same time and in the same 

manner as the limits are adjusted under 

section 415(d), except that— 

(1) The base period is the calendar 

quarter beginning July 1, 2013; and 

(2) The amount of any increment to 

the limit that is not a multiple of 

$10,000 will be rounded to the next 

lowest multiple of $10,000. 


jspears on DSK121TN23PROD with PROPOSALS3
10550 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

(B) Age limitation. The maximum age 

set forth in paragraph (q)(1)(ii) of this 

section may be adjusted to reflect 

changes in mortality, with any adjusted 

age to be prescribed by the 

Commissioner in revenue rulings, 

notices, or other guidance published in 

the Internal Revenue Bulletin. See 

§ 601.601(d) of this chapter. 

(C) Prospective application of 

adjustments. If a contract fails to be a 

QLAC because it does not satisfy the 

dollar limitation in paragraph (q)(2)(ii) 

of this section or the age limitation in 

paragraph (q)(1)(ii) of this section, any 

subsequent adjustment that is made 

pursuant to this paragraph (q)(4)(ii) will 

not cause the contract to become a 

QLAC. 

(iii) Determination of whether 

contract is intended to be a QLAC—(A) 

Structural deficiency. If a contract fails 

to be a QLAC at any time for a reason 

other than an excess premium described 

in paragraph (q)(4)(i)(B) of this section, 

then, as of the date of purchase, the 

contract will not be treated as a QLAC 

(for purposes of § 1.401(a)(9)–5(c)(4)) or 

as a contract that is intended to be a 

QLAC (for purposes of paragraph (q)(2) 

of this section). 

(B) Roth IRAs. A contract that is 

purchased under a Roth IRA is not 

treated as a contract that is intended to 

be a QLAC for purposes of applying the 

dollar and percentage limitation rules in 

paragraphs (q)(2)(ii) and (q)(2)(iii) of this 

section. See A–14(d) of § 1.408A–6. If a 

QLAC is purchased or held under a 

plan, annuity, account, or traditional 

IRA, and that contract is later rolled 

over or converted to a Roth IRA, the 

contract is not treated as a contract that 

is intended to be a QLAC after the date 

of the rollover or conversion. Thus, 

premiums paid with respect to the 

contract will not be taken into account 

under paragraphs (q)(2)(ii) and (q)(2)(iii) 

of this section after the date of the 

rollover or conversion. 

(iv) Certain contract features 

permitted for QLACs—(A) Participating 

annuity contract. An annuity contract 

does not fail to satisfy the requirement 

of paragraph (q)(1)(vii) of this section 

merely because it provides for the 

payment of dividends described in 

paragraph (n)(3)(iii) of this section. 

(B) Contracts with cost-of-living 

adjustments. An annuity contract does 

not fail to satisfy the requirement of 

paragraph (q)(1)(vii) of this section 

merely because it provides for a cost-ofliving adjustment as described in 

paragraph (o)(2) of this section. 

(v) Group annuity contract 

certificates. The requirement under 

paragraph (q)(1)(vi) of this section that 

the contract state that it is intended to 

be a QLAC when issued is satisfied if a 

certificate is issued under a group 

annuity contract and the certificate, 

when issued, states that the employee’s 

interest under the group annuity 

contract is intended to be a QLAC. 

§ 1.401(a)(9)–7 Rollovers and transfers. 

(a) Treatment of rollover from 

distributing plan. If an amount is 

distributed by a plan, then the amount 

distributed is still taken into account by 

the distributing plan for purposes of 

satisfying the requirements of section 

401(a)(9), even if part of the distribution 

is rolled over into another eligible 

retirement plan described in section 

402(c)(8). However, an amount that is a 

required minimum distribution under 

section 401(a)(9) is not eligible to be 

rolled over (and is therefore includible 

in the taxpayer’s gross income under 

section 402). For this purpose, the 

amount that constitutes a required 

minimum distribution for a calendar 

year is determined in accordance with 

§ 1.402(c)–2(f) for a distribution to an 

employee and § 1.402(c)–2(j)(3) for a 

distribution to a beneficiary. 

(b) Treatment of rollover by receiving 

plan. If an amount is distributed by one 

plan (distributing plan) and is rolled 

over to another plan (receiving plan), 

the benefit of the employee under the 

receiving plan is increased by the 

amount rolled over for purposes of 

determining the required minimum 

distribution for the calendar year 

following the calendar year in which the 

amount rolled over was distributed. If 

the amount rolled over is received after 

the last valuation date in the calendar 

year under the receiving plan, the 

benefit of the employee as of that 

valuation date, adjusted in accordance 

with § 1.401(a)(9)–5(b), is increased by 

the rollover amount valued as of the 

date of receipt. In addition, if the 

amount rolled over is received in a 

different calendar year from the 

calendar year in which it is distributed, 

the amount rolled over is deemed to 

have been received by the receiving 

plan on the last day of the calendar year 

in which it was distributed. 

(c) Treatment of transfer under 

transferor plan—(1) Generally not 

treated as distribution. In the case of a 

transfer of an amount of an employee’s 

benefit from one plan (transferor plan) 

to another plan (transferee plan), the 

transfer is not treated as a distribution 

by the transferor plan for purposes of 

section 401(a)(9). Instead, the benefit of 

the employee under the transferor plan 

is decreased by the amount transferred. 

However, if any portion of an 

employee’s benefit is transferred in a 

distribution calendar year with respect 

to that employee, in order to satisfy the 

requirements of section 401(a)(9), the 

transferor plan must determine the 

amount of the required minimum 

distribution with respect to that 

employee for the calendar year of the 

transfer using the employee’s benefit 

under the transferor plan before the 

transfer. Additionally, if any portion of 

an employee’s benefit is transferred in 

the employee’s second distribution 

calendar year, but on or before the 

employee’s required beginning date, in 

order to satisfy section 401(a)(9), the 

transferor plan must determine the 

amount of the required minimum 

distribution for the employee’s first 

distribution calendar year based on the 

employee’s benefit under the transferor 

plan before the transfer. The transferor 

plan may satisfy the minimum 

distribution requirement for the 

calendar year of the transfer (and the 

prior year if applicable) by segregating 

the amount that must be distributed 

from the employee’s benefit and not 

transferring that amount. That amount 

may be retained by the transferor plan 

and must be distributed on or before the 

date required under section 401(a)(9). 

(2) Account balance decreased after 

transfer. For purposes of determining 

any required minimum distribution for 

the calendar year following the calendar 

year in which the transfer occurs, in the 

case of a transfer after the last valuation 

date for the calendar year of the transfer 

under the transferor plan, the benefit of 

the employee as of that valuation date, 

adjusted in accordance with 

§ 1.401(a)(9)–5(b), is decreased by the 

amount transferred, valued as of the 

date of the transfer. 

(d) Treatment of transfer under 

transferee plan. In the case of a transfer 

from one plan (transferor plan) to 

another plan (transferee plan), the 

benefit of the employee under the 

transferee plan is increased by the 

amount transferred in the same manner 

as if it were a plan receiving a rollover 

contribution under paragraph (b) of this 

section. 

(e) Treatment of spinoff or merger. For 

purposes of determining an employee’s 

benefit and required minimum 

distribution under section 401(a)(9), a 

spinoff, a merger, or a consolidation (as 

defined in § 1.414(l)–1(b)) is treated as 

a transfer of the benefits of the 

employees involved. Consequently, the 

benefit and required minimum 

distribution with respect to each 

employee whose benefits are transferred 

will be determined in accordance with 

paragraphs (c) and (d) of this section. 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10551 

§ 1.401(a)(9)–8 Special rules. 

(a) Use of separate accounts—(1) 

Separate application of section 

401(a)(9) for beneficiaries—(i) In 

general. Notwithstanding § 1.401(a)(9)– 

5(b) and except as otherwise provided 

in this paragraph (a)(1), after the death 

of the employee, section 401(a)(9) is 

applied separately with respect to the 

separate interests of each of the 

employee’s beneficiaries under the plan 

provided that the separate accounting 

requirements of paragraph (a)(2) of this 

section are satisfied. 

(ii) Separate accounting requirements 

not timely satisfied. If the separate 

accounting requirements of paragraph 

(a)(2) of this section are not satisfied 

until after the end of the calendar year 

following the calendar year of the 

employee’s death, then for distribution 

calendar years after those requirements 

are satisfied— 

(A) The aggregate required 

distribution for a distribution calendar 

year is determined without regard to the 

separate account rule in paragraph 

(a)(1)(i) of this section; 

(B) The amount of the aggregate 

required distribution determined in 

accordance with paragraph (a)(1)(ii)(A) 

of this section is allocated among the 

beneficiaries based on each respective 

beneficiary’s share of the total 

remaining balance of the employee’s 

interest in the plan; and 

(C) The allocated share for each 

beneficiary determined under paragraph 

(a)(2)(ii)(B) of this section is required to 

be distributed to that beneficiary. 

(iii) Separate application of section 

401(a)(9) for trust beneficiaries—(A) 

General prohibition. Except as provided 

in paragraph (a)(1)(iii)(B) of this section, 

section 401(a)(9) may not be applied 

separately to the separate interests of 

each of the beneficiaries of a trust that 

satisfies the requirements of 

§ 1.401(a)(9)–4(f)(2). Thus, section 

401(a)(9) may not be applied separately 

to each of the beneficiaries of the trust 

who are taken into account under 

§ 1.401(a)(9)–4(f)(3). In this case, for 

purposes of the excise tax under section 

4974, the trust is the payee with respect 

to the required distribution of the 

employee’s interest in the plan. 

(B) Special rule for type I applicable 

multi-beneficiary trust. Section 401(a)(9) 

may be applied separately with respect 

to the separate interests of the 

beneficiaries reflected in the separate 

trusts of each beneficiary of a type I 

applicable multi-beneficiary trust 

described in § 1.401(a)(9)–4(g)(2), 

provided that the separate accounting 

rules of paragraph (a)(2) of this section 

are satisfied. 

(2) Separate accounting 

requirements—(i) Allocation of postdeath distributions required. A separate 

accounting must allocate any post-death 

distribution with respect to a 

beneficiary’s interest to the separate 

account of the beneficiary receiving that 

distribution. 

(ii) Allocation of other items. A 

separate accounting must allocate all 

post-death investment gains and losses, 

contributions, and forfeitures, for the 

period prior to the establishment of the 

separate accounts on a pro rata basis in 

a reasonable and consistent manner 

among the separate accounts. In lieu of 

a pro rata allocation of investment gains 

and losses, a separate accounting may 

provide for the establishment of 

separate accounts that have separate 

investments under which the 

investment gains and losses attributable 

to assets held in a separate account are 

allocated only to that separate account. 

(b) Application of consent 

requirements. Section 411(a)(11) and 

section 417(e) require employee and 

spousal consent to certain distributions 

of plan benefits while those benefits are 

immediately distributable. If an 

employee’s normal retirement age is 

later than the employee’s required 

beginning date and, therefore, benefits 

are still immediately distributable 

(within the meaning of § 1.411(a)– 

11(c)(4)), distributions must be made to 

the employee (or, if applicable, to the 

employee’s spouse) in a manner that 

satisfies the requirements of section 

401(a)(9) even though the employee (or, 

if applicable, the employee’s spouse) 

fails to consent to the distribution. In 

that case, the benefit may be distributed 

in the form of a qualified joint and 

survivor annuity (QJSA) or in the form 

of a qualified preretirement survivor 

annuity (QPSA), as applicable, and the 

consent requirements of sections 

411(a)(11) and 417(e) are deemed to be 

satisfied if the plan has made reasonable 

efforts to obtain consent from the 

employee (or, if applicable, the 

employee’s spouse) and if the 

distribution otherwise meets the 

requirements of section 417. If the 

distribution is not required to be in the 

form of a QJSA to an employee or a 

QPSA to a surviving spouse, the 

required minimum distribution amount 

may be paid to satisfy section 401(a)(9), 

and the consent requirements of 

sections 411(a)(11) and 417(e) are 

deemed to be satisfied if the plan has 

made reasonable efforts to obtain 

consent from the employee (or, if 

applicable, the employee’s spouse) and 

the distribution otherwise meets the 

requirements of section 417. 

(c) Definition of spouse. Except as 

otherwise provided in paragraph (d)(1) 

of this section (in the case of 

distributions of a portion of an 

employee’s benefit payable to a former 

spouse of an employee pursuant to a 

qualified domestic relations order), for 

purposes of satisfying the requirements 

of section 401(a)(9), an individual is the 

spouse or surviving spouse of an 

employee if the marriage of the 

employee and individual is recognized 

for federal tax purposes under the rules 

of § 301.7701–18. In the case of 

distributions after the death of an 

employee, for purposes of section 

401(a)(9), the spouse of the employee is 

determined as of the date of death of the 

employee. 

(d) Treatment of QDROs—(1) 

Continued treatment of spouse. A 

former spouse to whom all or a portion 

of the employee’s benefit is payable 

pursuant to a qualified domestic 

relations order described in section 

414(p) (QDRO) is treated as a spouse 

(including a surviving spouse) of the 

employee for purposes of satisfying the 

requirements of section 401(a)(9), 

including the minimum distribution 

incidental benefit requirement under 

section 401(a)(9)(G), regardless of 

whether the QDRO specifically provides 

that the former spouse is treated as the 

spouse for purposes of sections 

401(a)(11) and 417. 

(2) Separate accounts—(i) In 

general—(A) Separate accounts while 

the employee is alive. If a QDRO 

provides that an employee’s benefit is to 

be divided and a portion is to be 

allocated to an alternate payee, that 

portion will be treated as a separate 

account (or segregated share) which 

separately must satisfy the requirements 

of section 401(a)(9) and may not be 

aggregated with other separate accounts 

(or segregated shares) of the employee 

for purposes of satisfying section 

401(a)(9). Except as otherwise provided 

in paragraph (f)(2)(ii) of this section, 

distribution of a separate account 

allocated to an alternate payee pursuant 

to a QDRO must be made in accordance 

with section 401(a)(9). For example, 

distributions of the separate account 

will satisfy section 401(a)(9)(A) if 

required minimum distributions from 

the separate account during the 

employee’s lifetime begin no later than 

the employee’s required beginning date 

and the required minimum distribution 

is determined in accordance with 

§ 1.401(a)(9)–5 for each distribution 

calendar year using an applicable 

denominator determined under 

§ 1.401(a)(9)–5(c) (determined by 

treating the spousal alternate payee as 

the employee’s spouse). 


jspears on DSK121TN23PROD with PROPOSALS3
10552 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

(B) Separate accounts after the death 

of the employee. The determination of 

whether distributions from the separate 

account after the death of the employee 

to the alternate payee will be made in 

accordance with section 401(a)(9)(B)(i) 

or in accordance with section 

401(a)(9)(B)(ii) or (iii) and (iv) will 

depend on whether distributions have 

begun as determined under 

§ 1.401(a)(9)–2(a) (which provides, in 

general, that distributions are not 

treated as having begun until the 

employee’s required beginning date 

even though payments may actually 

have begun before that date). For 

example, if the alternate payee dies 

before the employee, and if distributions 

of the separate account allocated to the 

alternate payee pursuant to the QDRO 

are to be made to the alternate payee’s 

beneficiary, then that beneficiary may 

be treated as a designated beneficiary for 

purposes of determining the required 

minimum distribution from the separate 

account after the death of the employee 

provided that the beneficiary of the 

alternate payee is an individual who is 

a beneficiary under the plan or specified 

to or in the plan. Specification in or 

pursuant to the QDRO is treated as 

specification to the plan. 

(ii) Satisfaction of section 401(a)(9) 

requirements. Distribution of the 

separate account allocated to an 

alternate payee pursuant to a QDRO 

satisfies the requirements of section 

401(a)(9)(A)(ii) if the separate account is 

distributed, beginning no later than the 

employee’s required beginning date, 

over the life of the alternate payee (or 

over a period not extending beyond the 

life expectancy of the alternate payee). 

Also if, pursuant to § 1.401(a)(9)– 

3(b)(4)(iii) or (c)(5)(iii), the plan permits 

the employee to elect the distribution 

method that will apply upon the death 

of the employee, that election is to be 

made only by the alternate payee for 

purposes of distributing the alternate 

payee’s separate account. If the alternate 

payee dies after distribution of the 

alternate payee’s separate account has 

begun (determined under § 1.401(a)(9)– 

2(a)(3)) but before the employee dies, 

distribution of the remaining portion of 

that portion of the benefit allocated to 

the alternate payee must be made in 

accordance with the rules in 

§ 1.401(a)(9)–5(c) or § 1.401(a)(9)–6(a) 

for distributions during the life of the 

employee. Only after the death of the 

employee is the amount of the required 

minimum distribution determined in 

accordance with the rules in 

§ 1.401(a)(9)–5(d) or § 1.401(a)(9)–6(b). 

(3) Other situations. If a QDRO does 

not provide that an employee’s benefit 

is to be divided but provides that a 

portion of an employee’s benefit 

(otherwise payable to the employee) is 

to be paid to an alternate payee, that 

portion is not treated as a separate 

account (or segregated share) of the 

employee. Instead, that portion is 

aggregated with any amount distributed 

to the employee and treated as having 

been distributed to the employee for 

purposes of determining whether 

section 401(a)(9) has been satisfied with 

respect to that employee. 

(e) Application of section 401(a)(9) 

pending determination of whether a 

domestic relations order is a QDRO is 

being made. A plan does not fail to 

satisfy the requirements of section 

401(a)(9) merely because it fails to 

distribute an amount otherwise required 

to be distributed by section 401(a)(9) 

during the period in which the issue of 

whether a domestic relations order is a 

QDRO is being determined pursuant to 

section 414(p)(7), provided that the 

period does not extend beyond the 18- 

month period described in section 

414(p)(7)(E). To the extent that a 

distribution otherwise required under 

section 401(a)(9) is not made during this 

period, any segregated amounts, as 

defined in section 414(p)(7)(A), are 

treated as though the amounts are not 

vested during the period and any 

distributions with respect to those 

amounts must be made under the 

relevant rules for nonvested benefits 

described in either § 1.401(a)(9)–5(g) or 

§ 1.401(a)(9)–6(f), as applicable. 

(f) Application of section 401(a)(9) 

when insurer is in state delinquency 

proceedings. A plan does not fail to 

satisfy the requirements of section 

401(a)(9) merely because an individual’s 

distribution from the plan is less than 

the amount otherwise required to satisfy 

section 401(a)(9) because distributions 

were being paid under an annuity 

contract issued by a life insurance 

company in state insurer delinquency 

proceedings and have been reduced or 

suspended by reason of those state 

proceedings. To the extent that a 

distribution otherwise required under 

section 401(a)(9) is not made during the 

state insurer delinquency proceedings, 

that amount and any additional amount 

accrued during that period are treated as 

though those amounts are not vested 

during that period and any distributions 

with respect to those amounts must be 

made under the relevant rules for 

nonvested benefits described in either 

§ 1.401(a)(9)–5(g) or § 1.401(a)(9)–6(f), as 

applicable. 

(g) In-service distributions required to 

satisfy section 401(a)(9). A plan does 

not fail to qualify as a pension plan 

within the meaning of section 401(a) 

solely because the plan permits 

distributions to commence to an 

employee on or after the employee’s 

required beginning date (as determined 

in accordance with § 1.401(a)(9)–2(b)) 

even though the employee has not 

retired or attained the normal retirement 

age under the plan as of the date on 

which the distributions commence. This 

rule applies without regard to whether 

the employee is a 5-percent owner with 

respect to the plan year ending in the 

calendar year in which distributions 

commence. 

(h) TEFRA section 242(b) elections— 

(1) In general. Even though the 

distribution requirements added by the 

Tax Equity and Fiscal Responsibility 

Act of 1982, Public Law 97–248, 96 Stat. 

324 (1982) (TEFRA), were retroactively 

repealed in 1984, the transitional 

election rule in section 242(b) of TEFRA 

(referred to as a section 242(b)(2) 

election in this paragraph (h)) was 

preserved. While sections 401(a)(11) 

and 417 must be satisfied with respect 

to any distribution subject to those 

requirements, satisfaction of those 

requirements is not considered a 

revocation of the section 242(b) election. 

(2) Application of section 242(b) 

election after transfer—(i) Section 

242(b)(2) election made under transferor 

plan. If an amount is transferred from 

one plan (transferor plan) to another 

plan (transferee plan), the amount 

transferred may be distributed in 

accordance with a section 242(b)(2) 

election made under the transferor plan 

if the employee did not elect to have the 

amount transferred and if the transferee 

plan separately accounts for the amount 

transferred. However, only the benefit 

attributable to the amount transferred, 

plus earnings thereon, may be 

distributed in accordance with the 

section 242(b)(2) election made under 

the transferor plan. If the employee 

elected to have the amount transferred 

or the transferee plan does not 

separately account for the amount 

transferred, the transfer is treated as a 

distribution and rollover of the amount 

transferred for purposes of this section. 

(ii) Section 242(b)(2) election made 

under transferee plan. If an amount is 

transferred from one plan to another 

plan, the amount transferred may not be 

distributed in accordance with a section 

242(b)(2) election made under the 

transferee plan. If a section 242(b)(2) 

election was made under the transferee 

plan, the transferee plan must separately 

account for the amount transferred. If 

the transferee plan does not separately 

account for the amount transferred, the 

section 242(b)(2) election under the 

transferee plan is revoked, and 

subsequent distributions by the 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10553 

transferee plan must satisfy section 

401(a)(9). 

(iii) Spinoff, merger, or consolidation 

treated as transfer. A spinoff, merger, or 

consolidation, as defined in § 1.414(l)– 

1(b), is treated as a transfer for purposes 

of the section 242(b)(2) election. 

(3) Application of section 242(b) 

election after rollover. If an amount is 

distributed from one plan (distributing 

plan) and rolled over into another plan 

(receiving plan), the amount rolled over 

must be distributed from the receiving 

plan in accordance with section 

401(a)(9) whether or not the employee 

made a section 242(b)(2) election under 

the distributing plan. Further, if the 

amount rolled over was not distributed 

in accordance with the election, the 

election under the distributing plan is 

revoked and all subsequent 

distributions by the distributing plan 

must satisfy section 401(a)(9). Finally, if 

the employee made a section 242(b)(2) 

election under the receiving plan and 

the election is still in effect, the 

receiving plan must separately account 

for the amount rolled over and 

distribute that amount in accordance 

with section 401(a)(9). If the receiving 

plan does not separately account for the 

amounts rolled over, any section 

242(b)(2) election under the receiving 

plan is revoked and subsequent 

distributions under the receiving plan 

must satisfy section 401(a)(9). 

(4) Revocation of section 242(b) 

election—(i) In general. A section 

242(b)(2) election may be revoked after 

the required beginning date under 

section 401(a)(9)(C). However, if the 

section 242(b)(2) election is revoked 

after the required beginning date, and 

the total amount of the distributions that 

would have been required prior to the 

date of the revocation in order to satisfy 

section 401(a)(9), but for the section 

242(b)(2) election, have not been made, 

then— 

(A) The catch-up distribution 

described in paragraph (h)(4)(ii) of this 

section must be made by the end of the 

calendar year following the calendar 

year in which the revocation occurs; 

and 

(B) Distributions must continue in 

accordance with section 401(a)(9). 

(ii) Catch-up distribution. The catchup distribution must be equal to the 

total amount not yet distributed that 

would have been required to be 

distributed to satisfy the requirements of 

section 401(a)(9). 

■ Par. 3.Section 1.401(a)(9)–9 is 

amended as follows: 

■ 1. In the title, remove the phrase 

‘‘distribution period’’ and add in its 

place the phrase ‘‘uniform lifetime’’. 

■ 2. In paragraph (a), remove the phrase 

‘‘applicable distribution period’’ and 

add in its place the phrase ‘‘uniform 

lifetime’’. 

■ 3. In paragraph (c), remove the phrase 

‘‘distribution period’’ and add in its 

place the phrase ‘‘applicable 

denominator’’. 

■ 4. In the heading of the second 

column of Table 2 to paragraph (c), 

remove the phrase ‘‘Distribution period’’ 

and add in its place the phrase 

‘‘Applicable denominator’’. 

■ 5. In paragraph (f)(2)(i), remove the 

phrase ‘‘distribution period that 

applies’’ and add in its place the phrase 

‘‘applicable denominator’’. 

■ 6. In paragraph (f)(2)(i), remove the 

phrase ‘‘applicable distribution period’’ 

and add in its place the phrase 

‘‘applicable denominator’’. 

■ 7. In the heading of paragraph 

(f)(2)(ii), remove the phrase 

‘‘distribution period’’ and add in its 

place the word ‘‘denominator’’. 

■ 8. In the heading of paragraph 

(f)(2)(ii)(A), remove the phrase 

‘‘Distribution period’’ and add in its 

place the phrase ‘‘Applicable 

denominator’’. 

■ 9. In paragraph (f)(2)(ii)(A), remove 

the phrase ‘‘distribution period that 

applies’’ and add in its place the phrase 

‘‘applicable denominator’’. 

■ 10. In paragraph (f)(2)(ii)(A), remove 

the phrase ‘‘resulting distribution 

period’’ and add in its place the phrase 

‘‘resulting applicable denominator’’. 

■ 11. In paragraph (f)(2)(ii)(A), remove 

the last sentence. 

■ 12. In paragraph (f)(2)(ii)(B), remove 

the phrase ‘‘distribution period that 

would have applied’’ and add in its 

place the phrase ‘‘denominator that 

would have applied’’. 

■ 13. In paragraph (f)(2)(ii)(B), remove 

the phrase ‘‘period applicable’’ and add 

in its place the phrase ‘‘life 

expectancy’’. 

■ 14. In paragraph (f)(2)(ii)(B), remove 

the phrase ‘‘(the original distribution 

period, reduced by 1 year)’’ and add in 

its place the phrase ‘‘(the original life 

expectancy, reduced by 1 year)’’. 

■ 15. In paragraph (f)(2)(ii)(B), remove 

the phrase ‘‘applicable distribution 

period’’ and add in its place the phrase 

‘‘applicable denominator’’. 

■ 16. In paragraph (f)(2)(ii)(B), remove 

the last sentence. 

■ Par. 4. Revise § 1.402(c)–2 to read as 

follows: 

§ 1.402(c)–2 Eligible rollover distributions. 

(a) Overview of rollover and related 

statutory provisions—(1) General rule— 

(i) Rollover of distribution paid to 

employee. Under section 402(c), any 

portion of a distribution paid to an 

employee from a qualified plan that is 

an eligible rollover distribution 

described in section 402(c)(4) may be 

rolled over to an eligible retirement plan 

described in section 402(c)(8)(B). See 

paragraph (j) of this section for rules 

relating to distributions paid to a 

surviving spouse or a non-spousal 

beneficiary. 

(ii) Exclusion from income. Except as 

otherwise provided in this section, if an 

eligible rollover distribution is paid to 

an employee, then the amount 

distributed is not currently includible in 

gross income, provided that it is 

contributed to an eligible retirement 

plan no later than the 60th day 

following the day on which the 

employee received the distribution. 

However, if all or any portion of an 

amount equal to the amount withheld is 

not contributed as a rollover, it is 

included in the employee’s gross 

income to the extent required under 

section 402(a), and also may be subject 

to the 10-percent additional income tax 

under section 72(t). 

(iii) Definition of eligible retirement 

plan—(A) In general. An eligible 

retirement plan means an IRA described 

in paragraph (a)(1)(iii)(B)(1) of this 

section or a qualified plan described in 

paragraph (a)(1)(iii)(B)(2) of this section. 

In addition, an eligible deferred 

compensation plan described in section 

457(b) that is maintained by an 

employer described in section 

457(e)(1)(A) is treated as an eligible 

retirement plan, but only if the plan 

separately accounts for the amount of 

the rollover. 

(B) Definitions of IRA and qualified 

plan. For purposes of section 402(c) and 

this section— 

(1) An IRA is an individual retirement 

account described in section 408(a) or 

an individual retirement annuity (other 

than an endowment contract) described 

in section 408(b); and 

(2) A qualified plan is an employees’ 

trust described in section 401(a) that is 

exempt from tax under section 501(a), 

an annuity plan described in section 

403(a), or an annuity contract described 

in section 403(b). 

(iv) Multiple distributions. If more 

than one distribution is received by an 

employee from a qualified plan during 

a taxable year, the 60-day deadline 

applies separately to each distribution. 

Because the amount withheld as income 

tax under section 3405(c) is considered 

an amount distributed under section 

402(c), an amount equal to all or any 

portion of the amount withheld may be 

contributed as a rollover to an eligible 

retirement plan within the 60-day 

period in addition to the net amount of 


jspears on DSK121TN23PROD with PROPOSALS3
10554 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

the eligible rollover distribution actually 

received by the employee. 

(v) Definition of rollover. For purposes 

of section 402(c) and this section, a 

rollover is— 

(A) A direct rollover as described in 

§ 1.401(a)(31)–1, Q&A–3; 

(B) A contribution of an eligible 

rollover distribution to an eligible 

retirement plan that, except as provided 

in paragraph (b)(2) of this section, 

satisfies the time period requirement in 

paragraph (a)(1)(ii) of this section and 

the designation requirement described 

in paragraph (k)(1) of this section; or 

(C) A repayment of a distribution that 

is treated as a rollover, as described in 

paragraph (a)(1)(vi) of this section. 

(vi) Certain repayments treated as 

rollovers. The repayment of a 

distribution is treated as a rollover if 

that treatment is prescribed under 

another statutory provision. For 

example, the repayment of a qualified 

disaster distribution under section 302 

of Division EE of the Consolidated 

Appropriations Act, 2021, Public Law 

116–260, 134 Stat. 1182 (2020) is treated 

as a rollover for purposes of this section. 

(2) Related Internal Revenue Code 

provisions—(i) Direct rollover option. 

Section 401(a)(31) requires qualified 

plans to provide a distributee of an 

eligible rollover distribution the option 

to elect to have the distribution paid 

directly to an eligible retirement plan in 

a direct rollover. See § 1.401(a)(31)–1 for 

further guidance concerning this direct 

rollover option. 

(ii) Notice requirement. Section 402(f) 

requires the plan administrator of a 

qualified plan to provide, within a 

reasonable time before making an 

eligible rollover distribution, a written 

explanation to the distributee of the 

distributee’s right to elect a direct 

rollover and the withholding 

consequences of not making that 

election. The explanation also is 

required to provide certain other 

relevant information relating to the 

taxation of distributions. See § 1.402(f)– 

1 for guidance concerning the written 

explanation required under section 

402(f). 

(iii) Mandatory income tax 

withholding. If a distributee of an 

eligible rollover distribution does not 

elect to have the eligible rollover 

distribution paid directly from the plan 

to an eligible retirement plan in a direct 

rollover under section 401(a)(31), the 

eligible rollover distribution is subject 

to mandatory income tax withholding 

under section 3405(c). See § 31.3405(c)– 

1 of this chapter for provisions relating 

to the withholding requirements 

applicable to eligible rollover 

distributions. 

(iv) Section 403(b) annuities. See 

§ 1.403(b)–7(b) for guidance concerning 

the direct rollover requirements for 

distributions from annuities described 

in section 403(b). 

(3) Applicability date—(i) In general. 

The rules provided in this section apply 

to any distribution made on or after 

January 1, 2022. 

(ii) Distributions prior to January 1, 

2022. For any distribution made before 

January 1, 2022, the rules of 26 CFR 

1.402(c)–2 and 26 CFR 1.402(c)–3 (as 

they appeared in the April 1, 2021 

edition of 26 CFR part 1) apply. 

Alternatively, the rules provided in this 

section may be applied to those 

distributions. 

(b) Special rules—(1) Rules related to 

Roth accounts—(i) Treatment of Roth 

conversions. If all or any portion of an 

eligible rollover distribution that is 

rolled over to a Roth IRA is not from a 

designated Roth account described in 

section 402A, then the amount rolled 

over to the Roth IRA is included in the 

employee’s gross income to the extent 

required under section 402(a) (but 

generally is not subject to the 10-percent 

additional income tax under section 

72(t)). 

(ii) Treatment of distributions from 

designated Roth accounts. A 

distribution from a designated Roth 

account may be rolled over only to 

another designated Roth account or to a 

Roth IRA. See § 1.402A–1, Q&A–5 for 

rules that apply to such a rollover. 

(2) Extensions of and exceptions to 

60-day deadline—(i) Waiver of 60-day 

deadline. The Commissioner may waive 

the 60-day deadline described in 

paragraph (a)(1)(ii) of this section if the 

failure to waive that requirement would 

be against equity or good conscience, 

including casualty, disaster, or other 

events beyond the reasonable control of 

the individual with respect to such 

requirement. See section 402(c)(3)(B). 

(ii) Frozen deposits. The 60-day 

period described in paragraph (a)(1)(ii) 

of this section does not include any 

period during which the amount 

transferred to the employee is a frozen 

deposit described in section 

402(c)(7)(B). The 60-day period also 

does not end earlier than 10 days after 

that amount ceases to be a frozen 

deposit. 

(iii) Exception for qualified plan loan 

offsets. See paragraph (g) of this section 

for the timing requirements related to 

the rollover of a qualified plan loan 

offset amount. 

(iv) Other distributions treated as 

rollovers. In the case of a repayment of 

a distribution treated as a rollover as 

described in paragraph (a)(1)(vi) of this 

section, see the applicable statutory 

provision and accompanying 

regulations, if any, for the timing 

requirements relating to the repayment. 

(3) Special rules for distribution that 

includes basis—(i) Rollover of basis to 

IRA. If an eligible rollover distribution 

includes some or all of an employee’s 

basis (that is, the employee’s investment 

in the contract), then the portion of the 

distribution that is allocable to the 

employee’s basis may be rolled over to 

an IRA. 

(ii) Rollover of basis to qualified trust 

must be done through direct trustee-totrustee transfer. If an eligible rollover 

distribution includes some or all of an 

employee’s basis, then the portion of an 

eligible rollover distribution that is 

allocable to the employee’s basis may be 

rolled over to a qualified plan only 

through a direct trustee-to-trustee 

transfer. In that case, the qualified trust 

or annuity contract must provide for 

separate accounting of the amount 

transferred (and earnings on that 

amount) including separately 

accounting for the portion of the 

distribution that includes an employee’s 

basis and the portion of the distribution 

that does not include basis. 

(iii) Rollover of basis to section 457(b) 

plans not permitted. The portion of an 

eligible rollover distribution that is 

allocable to an employee’s basis may not 

be rolled over to an eligible deferred 

compensation plan described in section 

457(b). 

(iv) Rollover of portion of distribution. 

If an eligible rollover distribution 

includes some or all of an employee’s 

basis and less than the entire 

distribution is being rolled over, then 

the amount rolled over is treated as 

consisting first of the portion of the 

distribution that is not allocable to the 

employee’s basis. 

(4) Special rules for distributions that 

include property—(i) In general. Except 

as provided in paragraph (b)(4)(ii) of 

this section, if an eligible rollover 

distribution consists of property other 

than money, then, only that property 

may be rolled over to an eligible 

retirement plan. 

(ii) Rollover of proceeds permitted. In 

the case of an eligible rollover 

distribution that consists of property 

other than money, the proceeds of the 

sale of that property may be rolled over 

to an eligible retirement plan. However, 

to the extent those proceeds exceed the 

property’s fair market value at the time 

of the sale, that excess may not be rolled 

over. See section 402(c)(6)(C) and (D) for 

other rules relating to the sale of 

distributed property. 

(c) Definition of eligible rollover 

distribution—(1) General rule. Unless 

specifically excluded, an eligible 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10555 

rollover distribution means any 

distribution to an employee of all or any 

portion of the balance to the credit of 

the employee in a qualified plan. Thus, 

except as specifically provided in 

paragraph (c)(2) or (3) of this section, 

any amount distributed to an employee 

from a qualified plan is an eligible 

rollover distribution, regardless of 

whether it is a distribution of a benefit 

that is protected under section 

411(d)(6). 

(2) Exceptions. An eligible rollover 

distribution does not include the 

following: 

(i) Any distribution that is one of a 

series of substantially equal periodic 

payments made (not less frequently than 

annually) over any one of the following 

periods— 

(A) The life of the employee (or the 

joint lives of the employee and the 

employee’s designated beneficiary); 

(B) The life expectancy of the 

employee (or the joint life and last 

survivor expectancy of the employee 

and the employee’s designated 

beneficiary); or 

(C) A specified period of ten years or 

more; 

(ii) Any distribution to the extent the 

distribution is a required minimum 

distribution under section 401(a)(9); or 

(iii) Any distribution which is made 

on account of hardship. 

(3) Other amounts not treated as 

eligible rollover distributions. The 

following amounts are not treated as 

eligible rollover distributions: 

(i) Elective deferrals (as defined in 

section 402(g)(3)) and employee 

contributions that, pursuant to rules 

prescribed by the Commissioner in 

revenue rulings, notices, or other 

guidance published in the Internal 

Revenue Bulletin (see § 601.601(d) of 

this chapter), are returned to the 

employee (together with the income 

allocable thereto) in order to comply 

with the section 415 limitations; 

(ii) Corrective distributions of excess 

deferrals as described in § 1.402(g)– 

1(e)(3), together with the income 

allocable to these corrective 

distributions; 

(iii) Corrective distributions of excess 

contributions under a qualified cash or 

deferred arrangement described in 

§ 1.401(k)–2(b)(2) and excess aggregate 

contributions described in § 1.401(m)– 

2(b)(2), together with the income 

allocable to these distributions; 

(iv) Loans that are treated as deemed 

distributions pursuant to section 72(p); 

(v) Subject to the rules of paragraph 

(c)(4) of this section, dividends paid on 

employer securities as described in 

section 404(k); 

(vi) The costs of life insurance 

coverage includible in the employee’s 

income under section 72(m)(3)(B); 

(vii) Prohibited allocations that are 

treated as deemed distributions 

pursuant to section 409(p); 

(viii) Distributions that are 

permissible withdrawals from an 

eligible automatic contribution 

arrangement within the meaning of 

section 414(w); 

(ix) Distributions of premiums for 

accident or health insurance under 

§ 1.402(a)–1(e)(1)(i); 

(x) Deemed distributions with respect 

to collectibles pursuant to section 

408(m); and 

(xi) Similar items designated by the 

Commissioner in revenue rulings, 

notices, and other guidance published 

in the Internal Revenue Bulletin. See 

§ 601.601(d) of this chapter. 

(4) Dividends reinvested in employer 

securities. Dividends paid to an 

employee stock ownership plan (as 

defined in section 4975(e)(7)) that are 

reinvested in employer securities 

pursuant to a participant election under 

section 404(k)(2)(A)(iii)(II) are included 

in the participant’s account balance and 

lose their character as dividends when 

subsequently distributed from the 

account. As a result, these amounts are 

eligible rollover distributions if they 

otherwise meet the requirements of this 

paragraph (c). 

(d) Determination of substantially 

equal periodic payments—(1) General 

rule. For purposes of paragraph (c)(2)(i) 

of this section, and except as provided 

in this paragraph (d) or paragraph (e) of 

this section, whether a series of 

payments is a series of substantially 

equal periodic payments over a 

specified period is determined at the 

time payments begin, and by following 

the principles of section 72(t)(2)(A)(iv), 

without regard to contingencies or 

modifications that have not yet 

occurred. Thus, for example, a joint and 

50-percent survivor annuity will be 

treated as a series of substantially equal 

payments at the time payments 

commence, as will a joint and survivor 

annuity that provides for increased 

payments to the employee if the 

employee’s beneficiary dies before the 

employee. Similarly, for purposes of 

determining if a disability benefit 

payment is part of a series of 

substantially equal payments for a 

period described in section 402(c)(4)(A), 

any contingency under which payments 

cease upon recovery from the disability 

may be disregarded. 

(2) Certain supplements disregarded. 

For purposes of determining whether a 

distribution is one of a series of 

payments that are substantially equal, 

social security supplements described 

in section 411(a)(9) are disregarded. For 

example, if a distributee receives a life 

annuity of $500 per month, plus a social 

security supplement consisting of 

payments of $200 per month until the 

distributee reaches the age at which 

social security benefits of not less than 

$200 a month begin, the $200 

supplemental payments are disregarded 

and, therefore, each monthly payment of 

$700 made before the social security age 

and each monthly payment of $500 

made after the social security age is 

treated as one of a series of substantially 

equal periodic payments for life. A 

series of payments that are not 

substantially equal solely because the 

amount of each payment is reduced 

upon attainment of social security 

retirement age (or, alternatively, upon 

commencement of social security early 

retirement, survivor, or disability 

benefits) is also treated as substantially 

equal as long as the reduction in the 

actual payments is level and does not 

exceed the applicable social security 

benefit. 

(3) Changes in the amount of 

payments or the distributee. If the 

amount (or, if applicable, the method of 

calculating the amount) of the payments 

changes so that subsequent payments 

are not substantially equal to prior 

payments, then a new determination 

must be made as to whether the 

remaining payments are a series of 

substantially equal periodic payments 

over a period specified in paragraph 

(c)(2)(i) of this section. This 

determination is made without taking 

into account payments made or the 

years of payment that elapsed prior to 

the change. However, a new 

determination is not made merely 

because, upon the death of the 

employee, the employee’s beneficiary 

becomes the distributee. Thus, if 

distributions commence over a period 

that is at least as long as either the first 

annuitant’s life or 10 years, then 

substantially equal payments to the 

survivor are not eligible rollover 

distributions even though the payment 

period remaining after the death of the 

employee is or may be less than the 

period described in section 402(c)(4)(A). 

For example, substantially equal 

periodic payments made under a life 

annuity with a five-year term certain 

would not be an eligible rollover 

distribution even when paid after the 

death of the employee with three years 

remaining under the term certain. 

(4) Defined contribution plans. The 

following rules apply in determining 

whether a series of payments from a 

defined contribution plan constitutes a 

series of substantially equal periodic 


jspears on DSK121TN23PROD with PROPOSALS3
10556 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

payments for a period described in 

section 402(c)(4)(A)— 

(i) Declining balance of years. A series 

of payments from an account balance 

under a defined contribution plan over 

a period is considered a series of 

substantially equal periodic payments 

over that period if, for each year, the 

amount of the distribution is calculated 

by dividing the account balance by the 

number of years remaining in the 

period. For example, a series of 

payments is considered substantially 

equal payments over 10 years if the 

series is determined as follows. In year 

1, the annual payment is the account 

balance divided by 10; in year 2, the 

annual payment is the remaining 

account balance divided by 9; and so on 

until year 10 when the entire remaining 

balance is distributed. 

(ii) Reasonable actuarial assumptions. 

If an employee’s account balance under 

a defined contribution plan is to be 

distributed in annual installments of a 

specified amount until the account 

balance is exhausted, then, for purposes 

of determining if the period of 

distribution is a period described in 

section 402(c)(4)(A), the period of years 

over which the installments will be 

distributed must be determined using 

reasonable actuarial assumptions. For 

example, if an employee has an account 

balance of $100,000, the employee 

elects distributions of $12,000 per year 

until the account balance is exhausted, 

and the future rate of return is assumed 

to be 5% per year, the account balance 

will be exhausted in approximately 12 

years. Similarly, if the same employee 

elects a fixed annual distribution 

amount and the fixed annual amount is 

less than or equal to $10,000, it is 

reasonable to assume that the future rate 

of return will be greater than 0% and, 

thus, the account will not be exhausted 

in less than 10 years. 

(e) Determination of whether a 

payment is an independent payment— 

(1) Definition of independent payments. 

Except as provided in paragraph (e)(2) 

and (3) of this section, a payment is 

treated as independent of the payments 

in a series of substantially equal 

payments, and thus not part of the series 

described in paragraph (c)(2)(i) of this 

section, if the payment is substantially 

larger or smaller than the other 

payments in the series. An independent 

payment is an eligible rollover 

distribution if it is not otherwise 

excepted from the definition of eligible 

rollover distribution. This rule applies 

regardless of whether the payment is 

made before, with, or after payments in 

the series. For example, if an employee 

elects a single payment of half of the 

account balance with the remainder of 

the account balance paid over the life 

expectancy of the distributee, the single 

payment is treated as independent of 

the payments in the series and is an 

eligible rollover distribution unless 

otherwise excepted. Similarly, if an 

employee’s surviving spouse receives a 

survivor life annuity of $1,000 per 

month plus a single payment on account 

of death of $7,500, the single payment 

is treated as independent of the 

payments in the annuity and is an 

eligible rollover distribution unless 

otherwise excepted. 

(2) Special rules—(i) Administrative 

error or delay. If, due solely to 

reasonable administrative error or delay 

in payment, there is an adjustment after 

the annuity starting date to the amount 

of any payment in a series of payments 

that otherwise would constitute a series 

of substantially equal payments 

described in section 402(c)(4)(A) and 

this section, the adjusted payment or 

payments are treated as part of the series 

of substantially equal periodic payments 

and are not treated as independent of 

the payments in the series. For example, 

if, due solely to reasonable 

administrative delay, the first payment 

of a life annuity is delayed by two 

months and reflects an additional two 

months’ worth of benefits, that payment 

is treated as a substantially equal 

payment in the series rather than as an 

independent payment. The result does 

not change merely because the amount 

of the adjustment is paid in a separate 

supplemental payment. 

(ii) Supplemental payments for 

annuitants. A supplemental payment 

from a defined benefit plan to an 

annuitant (that is, a retiree or 

beneficiary) is treated as part of a series 

of substantially equal payments, rather 

than as an independent payment, 

provided that the following conditions 

are met— 

(A) The supplement is a benefit 

increase for annuitants; 

(B) The amount of the supplement is 

determined in a consistent manner for 

all similarly situated annuitants; 

(C) The supplement is paid to 

annuitants who are otherwise receiving 

payments that would constitute 

substantially equal periodic payments; 

and 

(D) The aggregate supplement is less 

than or equal to the greater of 10% of 

the annual rate of payment for the 

annuity, or $750. 

(iii) Final payment in a series. If a 

payment in a series of payments from an 

account balance under a defined 

contribution plan represents the 

remaining balance in the account and is 

substantially less than the other 

payments in the series, the final 

payment must nevertheless be treated as 

a payment in the series of substantially 

equal payments and may not be treated 

as an independent payment if the other 

payments in the series are substantially 

equal and the payments are for a period 

described in section 402(c)(4)(A) based 

on the rules provided in paragraph 

(d)(4)(ii) of this section. Thus, the final 

payment will not be an eligible rollover 

distribution. 

(3) Additional guidance. The 

Commissioner, in revenue rulings, 

notices, and other guidance published 

in the Internal Revenue Bulletin, may 

provide additional rules for determining 

what is an independent payment under 

paragraph (e)(1) of this section and may 

prescribe a higher amount than the $750 

amount in paragraph (e)(2)(ii)(D) of this 

section. See § 601.601(d) of this chapter. 

(f) Determination of whether a 

distribution is a required minimum 

distribution—(1) Determination for 

calendar year of distribution. Except as 

provided in paragraphs (f)(2) and (3) of 

this section, if a minimum distribution 

is required for a calendar year, then the 

amounts distributed during that 

calendar year are treated as required 

minimum distributions under section 

401(a)(9) to the extent that the total 

minimum distribution required under 

section 401(a)(9) for the calendar year 

has not been satisfied (and accordingly, 

those amounts are not eligible rollover 

distributions). For example, if an 

employee is required under section 

401(a)(9) to receive a minimum 

distribution for a calendar year of 

$5,000 and the employee receives a total 

of $7,200 in that year, the first $5,000 

distributed will be treated as the 

required minimum distribution and will 

not be an eligible rollover distribution, 

and the remaining $2,200 will be an 

eligible rollover distribution if it 

otherwise qualifies. If the total section 

401(a)(9) required minimum 

distribution for a calendar year prior to 

the calendar year of the distribution is 

not distributed in that calendar year (for 

example, when the distribution for the 

calendar year in which the employee 

reaches age 72 is made on April 1 of the 

following calendar year), then, the 

amount that was required to be 

distributed, but not distributed, is added 

to the amount required to be distributed 

for the next calendar year in 

determining the portion of any 

distribution in the next calendar year 

that is a required minimum distribution. 

(2) Distribution before first 

distribution calendar year. Any amount 

that is paid to an employee before 

January 1 of the first distribution 

calendar year (as described in 

§ 1.401(a)(9)–5(a)(2)(ii)) is not treated as 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10557 

required under section 401(a)(9) and, 

thus, is an eligible rollover distribution 

if it otherwise qualifies. 

(3) Special rule for annuities. In the 

case of annuity payments from a defined 

benefit plan, or under an annuity 

contract purchased from an insurance 

company (including a qualified plan 

distributed annuity contract (as defined 

in paragraph (h) of this section)), the 

entire amount of any annuity payment 

made on or after January 1 of the first 

distribution calendar year (as described 

in § 1.401(a)(9)–5(a)(2)(ii)) is treated as 

an amount required under section 

401(a)(9) and, thus, is not an eligible 

rollover distribution. 

(g) Treatment of plan loan offset 

amounts—(1) General rule. A 

distribution of a plan loan offset 

amount, as defined in paragraph (g)(3)(i) 

of this section (including a qualified 

plan loan offset amount, a type of plan 

loan offset amount defined in paragraph 

(g)(3)(ii) of this section), is an eligible 

rollover distribution if it is described in 

paragraph (c) of this section. See 

§ 1.401(a)(31)–1, Q&A–16, for guidance 

concerning the offering of a direct 

rollover of a plan loan offset amount. 

See also § 31.3405(c)–1, Q&A–11, of this 

chapter for guidance concerning special 

withholding rules with respect to plan 

loan offset amounts. 

(2) Rollover period for a plan loan 

offset amount—(i) Plan loan offset 

amount that is not a qualified plan loan 

offset amount. A distribution of a plan 

loan offset amount that is an eligible 

rollover distribution and that is not a 

qualified plan loan offset amount may 

be rolled over by the employee to an 

eligible retirement plan within the 60- 

day period set forth in section 

402(c)(3)(A). 

(ii) Plan loan offset amount that is a 

qualified plan loan offset amount. A 

distribution of a plan loan offset amount 

that is an eligible rollover distribution 

and that is a qualified plan loan offset 

amount may be rolled over by the 

employee to an eligible retirement plan 

within the period set forth in section 

402(c)(3)(C), which is the individual’s 

tax filing due date (including 

extensions) for the taxable year in which 

the offset is treated as distributed from 

a qualified employer plan. 

(3) Definitions—(i) Plan loan offset 

amount. For purposes of section 402(c), 

a plan loan offset amount is the amount 

by which, under the plan terms 

governing a plan loan, an employee’s 

accrued benefit is reduced (offset) in 

order to repay the loan (including the 

enforcement of the plan’s security 

interest in an employee’s accrued 

benefit). A distribution of a plan loan 

offset amount can occur in a variety of 

circumstances, for example, when the 

terms governing a plan loan require that, 

in the event of the employee’s 

termination of employment or request 

for a distribution, the loan be repaid 

immediately or treated as in default. A 

distribution of a plan loan offset amount 

also occurs when, under the terms 

governing the plan loan, the loan is 

cancelled, accelerated, or treated as if it 

were in default (for example, when the 

plan treats a loan as in default upon an 

employee’s termination of employment 

or within a specified period thereafter). 

A distribution of a plan loan offset 

amount is an actual distribution, not a 

deemed distribution under section 

72(p). 

(ii) Qualified plan loan offset amount. 

For purposes of section 402(c), a 

qualified plan loan offset amount is a 

plan loan offset amount that satisfies the 

following requirements: 

(A) The plan loan offset amount is 

treated as distributed from a qualified 

employer plan to an employee or 

beneficiary solely by reason of the 

termination of the qualified employer 

plan, or the failure to meet the 

repayment terms of the loan because of 

the severance from employment of the 

employee; and 

(B) The plan loan offset amount 

relates to a plan loan that met the 

requirements of section 72(p)(2) 

immediately prior to the termination of 

the qualified employer plan or the 

severance from employment of the 

employee, as applicable. 

(iii) Qualified employer plan. For 

purposes of section 402(c) and this 

section, a qualified employer plan is a 

qualified employer plan as defined in 

section 72(p)(4). 

(4) Special rules for qualified plan 

loan offset amounts—(i) Definition of 

severance from employment. For 

purposes of paragraph (g)(3)(ii)(A) of 

this section, whether an employee has a 

severance from employment with the 

employer that maintains the qualified 

employer plan is determined in the 

same manner as under § 1.401(k)– 

1(d)(2). Thus, an employee has a 

severance from employment when the 

employee ceases to be an employee of 

the employer maintaining the plan. 

(ii) Offset because of severance from 

employment. A plan loan offset amount 

is treated as distributed from a qualified 

employer plan to an employee or 

beneficiary solely by reason of the 

failure to meet the repayment terms of 

a plan loan because of severance from 

employment of the employee if the plan 

loan offset: 

(A) Relates to a failure to meet the 

repayment terms of the plan loan, and 

(B) Occurs within the period 

beginning on the date of the employee’s 

severance from employment and ending 

on the first anniversary of that date. 

(5) Examples. The following examples 

illustrate the rules with respect to plan 

loan offset amounts, including qualified 

plan loan offset amounts, in this 

paragraph (g) and in §§ 1.401(a)(31)–1, 

Q&A–16, and 31.3405(c)–1, Q&A–11, of 

this chapter. For purposes of these 

examples, each reference to a plan refers 

to a qualified employer plan as 

described in section 72(p)(4). 

(i) Example 1—(A) In 2020, Employee 

A has an account balance of $10,000 in 

Plan Y, of which $3,000 is invested in 

a plan loan to Employee A that is 

secured by Employee A’s account 

balance in Plan Y. Employee A has 

made no after-tax employee 

contributions to Plan Y. The plan loan 

meets the requirements of section 

72(p)(2). Plan Y does not provide any 

direct rollover option with respect to 

plan loans. Employee A severs from 

employment on June 15, 2020. After 

severance from employment, Plan Y 

accelerates the plan loan and provides 

Employee A 90 days to repay the 

remaining balance of the plan loan. 

Employee A, who is under the age set 

forth in section 401(a)(9)(C)(i)(I), does 

not repay the loan within the 90 days 

and instead elects a direct rollover of 

Employee A’s entire account balance in 

Plan Y. On September 18, 2020 (within 

the 12-month period beginning on the 

date that Employee A severed from 

employment), Employee A’s 

outstanding loan is offset against the 

account balance. 

(B) In order to satisfy section 

401(a)(31), Plan Y must make a direct 

rollover by paying $7,000 directly to the 

eligible retirement plan chosen by 

Employee A. When Employee A’s 

account balance was offset by the 

amount of the $3,000 unpaid loan 

balance, Employee A received a plan 

loan offset amount (equivalent to 

$3,000) that is an eligible rollover 

distribution. However, under 

§ 1.401(a)(31)–1, Q&A–16, Plan Y 

satisfies section 401(a)(31), even though 

a direct rollover option was not 

provided with respect to the $3,000 plan 

loan offset amount. 

(C) No withholding is required under 

section 3405(c) on account of the 

distribution of the $3,000 plan loan 

offset amount because no cash or other 

property (other than the plan loan offset 

amount) is received by Employee A 

from which to satisfy the withholding. 

(D) The $3,000 plan loan offset 

amount is a qualified plan loan offset 

amount within the meaning of 

paragraph (g)(3)(ii) of this section. 


jspears on DSK121TN23PROD with PROPOSALS3
10558 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

Accordingly, Employee A may roll over 

up to the $3,000 qualified plan loan 

offset amount to an eligible retirement 

plan within the period that ends on the 

employee’s tax filing due date 

(including extensions) for the taxable 

year in which the offset occurs. 

(ii) Example 2—(A) The facts are the 

same as in Example 1 in paragraph 

(g)(5)(i) of this section, except that, 

rather than accelerating the plan loan, 

Plan Y permits Employee A to continue 

making loan installment payments after 

severance from employment. Employee 

A continues making loan installment 

payments until January 1, 2021, at 

which time Employee A does not make 

the loan installment payment due on 

January 1, 2021. In accordance with 

§ 1.72(p)–1, Q&A–10, Plan Y allows a 

cure period that continues until the last 

day of the calendar quarter following 

the quarter in which the required 

installment payment was due. Employee 

A does not make a plan loan installment 

payment during the cure period. Plan Y 

offsets the unpaid $3,000 loan balance 

against Employee A’s account balance 

on July 1, 2021 (which is after the 12- 

month period beginning on the date that 

Employee A severed from employment). 

(B) The conclusion is the same as in 

paragraph (g)(5)(i) of this section 

(Example 1), except that the $3,000 plan 

loan offset amount is not a qualified 

plan loan offset amount (because the 

offset did not occur within the 12- 

month period beginning on the date that 

Employee A severed from employment). 

Accordingly, Employee A may roll over 

up to the $3,000 plan loan offset amount 

to an eligible retirement plan within the 

60-day period provided in section 

402(c)(3)(A) (rather than within the 

period that ends on Employee A’s tax 

filing due date (including extensions) 

for the taxable year in which the offset 

occurs). 

(iii) Example 3—(A) The facts are the 

same as in Example 1 in paragraph 

(g)(5)(i) of this section, except that the 

terms governing the plan loan to 

Employee A provide that, upon 

severance from employment, Employee 

A’s account balance is automatically 

offset by the amount of any unpaid loan 

balance to repay the loan. Employee A 

severs from employment but does not 

request a distribution from Plan Y. 

Nevertheless, pursuant to the terms 

governing the plan loan, Employee A’s 

account balance is automatically offset 

on June 15, 2020, by the amount of the 

$3,000 unpaid loan balance. 

(B) The $3,000 plan loan offset 

amount is a qualified plan loan offset 

amount within the meaning of 

paragraph (g)(3)(ii) of this section. 

Accordingly, Employee A may roll over 

up to the $3,000 qualified plan loan 

offset amount to an eligible retirement 

plan within the period that ends on 

Employee A’s tax filing due date 

(including extensions) for the taxable 

year in which the offset occurs. 

(iv) Example 4—(A) The facts are the 

same as in Example 1 in paragraph 

(g)(5)(i) of this section, except that 

Employee A elects to receive a cash 

distribution of the account balance that 

remains after the $3,000 plan loan offset 

amount, instead of electing a direct 

rollover of the remaining account 

balance. 

(B) The amount of the distribution 

received by Employee A is $10,000 

($3,000 relating to the plan loan offset 

and $7,000 relating to the cash 

distribution). Because the amount of the 

$3,000 plan loan offset amount 

attributable to the loan is included in 

determining the amount of the eligible 

rollover distribution to which 

withholding applies, withholding in the 

amount of $2,000 (20 percent of 

$10,000) is required under section 

3405(c). The $2,000 is required to be 

withheld from the $7,000 to be 

distributed to Employee A in cash, so 

that Employee A actually receives a 

cash amount of $5,000. 

(C) The $3,000 plan loan offset 

amount is a qualified plan loan offset 

amount within the meaning of 

paragraph (g)(3)(ii) of this section. 

Accordingly, Employee A may roll over 

up to the $3,000 qualified plan loan 

offset to an eligible retirement plan 

within the period that ends on 

Employee A’s tax filing due date 

(including extensions) for the taxable 

year in which the offset occurs. In 

addition, Employee A may roll over up 

to $7,000 (the portion of the distribution 

that is not related to the offset) within 

the 60-day period provided in section 

402(c)(3). 

(v) Example 5—(A) The facts are the 

same as in Example 4 in paragraph 

(g)(5)(iv) of this section, except that the 

$7,000 distribution to Employee A after 

the offset consists solely of employer 

securities within the meaning of section 

402(e)(4)(E). 

(B) No withholding is required under 

section 3405(c) because the distribution 

consists solely of the $3,000 plan loan 

offset amount and the $7,000 

distribution of employer securities. This 

is the result because the total amount 

required to be withheld does not exceed 

the sum of the cash and the fair market 

value of other property distributed, 

excluding plan loan offset amounts and 

employer securities. 

(C) Employee A may roll over up to 

the $7,000 of employer securities to an 

eligible retirement plan within the 60- 

day period provided in section 

402(c)(3). The $3,000 plan loan offset 

amount is a qualified plan loan offset 

amount within the meaning of 

paragraph (g)(3)(ii) of this section. 

Accordingly, Employee A may roll over 

up to the $3,000 qualified plan loan 

offset amount to an eligible retirement 

plan within the period that ends on 

Employee A’s tax filing due date 

(including extensions) for the taxable 

year in which the offset occurs. 

(vi) Example 6—(A) Employee B, who 

is age 40, has an account balance in Plan 

Z. Plan Z does not provide for after-tax 

employee contributions. In 2022, 

Employee B receives a loan from Plan Z, 

the terms of which satisfy section 

72(p)(2). The loan is secured by elective 

contributions subject to the distribution 

restrictions in section 401(k)(2)(B). 

(B) Employee B fails to make an 

installment payment due on April 1, 

2023, or any other monthly payments 

thereafter. In accordance with § 1.72(p)– 

1, Q&A–10, Plan Z allows a cure period 

that continues until the last day of the 

calendar quarter following the quarter in 

which the required installment payment 

was due (September 30, 2023). 

Employee B does not make a plan loan 

installment payment during the cure 

period. On September 30, 2023, 

pursuant to section 72(p)(1), Employee 

B is taxed on a deemed distribution 

equal to the amount of the unpaid loan 

balance. Pursuant to paragraph (c)(3)(iv) 

of this section, the deemed distribution 

is not an eligible rollover distribution. 

(C) Because Employee B has not 

severed from employment or 

experienced any other event that 

permits the distribution under section 

401(k)(2)(B) of the elective contributions 

that secure the loan, Plan Z is 

prohibited from executing on the loan. 

Accordingly, Employee B’s account 

balance is not offset by the amount of 

the unpaid loan balance at the time of 

the deemed distribution. Thus, there is 

no distribution of an offset amount that 

is an eligible rollover distribution on 

September 30, 2023. 

(vii) Example 7—(A) The facts are the 

same as in Example 6 in paragraph 

(g)(5)(vi) of this section, except that 

Employee B has a severance from 

employment on November 1, 2023. On 

that date, Employee B’s unpaid loan 

balance is offset against the account 

balance on distribution. 

(B) The plan loan offset amount is not 

a qualified plan loan offset amount. 

Although the offset occurred within 12 

months after Employee B severed from 

employment, the plan loan does not 

meet the requirement in paragraph 

(g)(3)(ii)(B) of this section (that the plan 

loan meet the requirements of section 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10559 

72(p)(2) immediately prior to Employee 

B’s severance from employment). 

Instead, the loan was taxable on 

September 30, 2023 (prior to Employee 

B’s severance from employment on 

November 1, 2023), because of the 

failure to meet the level amortization 

requirement in section 72(p)(2)(C). 

Accordingly, Employee B may roll over 

the plan loan offset amount to an 

eligible retirement plan within the 60- 

day period provided in section 

402(c)(3)(A) (rather than within the 

period that ends on Employee B’s tax 

filing due date (including extensions) 

for the taxable year in which the offset 

occurs). 

(h) Qualified plan distributed annuity 

contract—(1) Definition of a qualified 

plan distributed annuity contract. A 

qualified plan distributed annuity 

contract is an annuity contract 

purchased for a participant, and 

distributed to the participant, by a 

qualified plan. 

(2) Treatment of amounts paid as 

eligible rollover distributions. Amounts 

paid under a qualified plan distributed 

annuity contract are payments of the 

balance to the credit of the employee for 

purposes of section 402(c) and are 

eligible rollover distributions if they 

otherwise qualify. Thus, for example, if 

the employee surrenders the contract for 

a single sum payment of its cash 

surrender value, the payment would be 

an eligible rollover distribution to the 

extent it is not a required minimum 

distribution under section 401(a)(9). 

This rule applies even if the annuity 

contract is distributed in connection 

with a plan termination. See 

§ 1.401(a)(31)–1, Q&A–17 and 

§ 31.3405(c)–1, Q&A–13 of this chapter 

concerning the direct rollover 

requirements and 20-percent 

withholding requirements, respectively, 

that apply to eligible rollover 

distributions from such an annuity 

contract. 

(i) [Reserved] 

(j) Treatment of distributions to 

beneficiary—(1) Spousal distributee—(i) 

In general. Pursuant to section 402(c)(9), 

if any distribution attributable to an 

employee is paid to the employee’s 

surviving spouse, section 402(c) applies 

to the distribution in the same manner 

as if the spouse were the employee. The 

same rule applies if any distribution 

attributable to an employee is paid in 

accordance with a qualified domestic 

relations order (as defined in section 

414(p)) (QDRO) to the employee’s 

spouse or former spouse who is an 

alternate payee. Therefore, a 

distribution to the surviving spouse of 

an employee (or to a spouse or former 

spouse who is an alternate payee under 

a QDRO), including a distribution of 

ancillary death benefits attributable to 

the employee, is an eligible rollover 

distribution if it would be described in 

paragraph (c) of this section had it been 

paid to the employee. 

(ii) Rollovers to qualified plans must 

be in capacity of employee. If a 

surviving spouse rolls over a 

distribution to a qualified plan 

described in paragraph (a)(1)(iii)(B)(2) of 

this section or to an eligible deferred 

compensation plan described in section 

457(b) that is maintained by an 

employer described in section 

457(e)(1)(A), then, with respect to the 

amount rolled over, that amount is 

treated as the spouse’s own interest 

under the receiving plan and not the 

interest of the decedent under the 

distributing plan. Thus, for example, in 

determining the required minimum 

distribution from the receiving plan 

with respect to the amount rolled over, 

distributions must satisfy section 

401(a)(9)(A) and not section 

401(a)(9)(B). 

(2) Non-spousal distributee. A 

distributee other than the employee or 

the employee’s surviving spouse (or a 

spouse or former spouse who is an 

alternate payee under a QDRO) is not 

permitted to roll over a distribution 

from a qualified plan. Therefore, a 

distribution to a non-spousal distributee 

does not constitute an eligible rollover 

distribution under section 402(c)(4) and 

is not subject to the 20-percent income 

tax withholding under section 3405(c). 

However, under section 402(c)(11), if 

the distributee is a designated 

beneficiary (as determined under 

§ 1.401(a)(9)–(4) who is not described in 

paragraph (j)(1) of this section and the 

distribution would be an eligible 

rollover distribution had it been paid to 

the employee, then the distributee may 

elect that the distribution be made in 

the form of a direct trustee-to-trustee 

transfer to an IRA established for the 

purpose of receiving that distribution. If 

a direct trustee-to-trustee transfer is 

made pursuant to section 402(c)(11) 

then— 

(i) The transfer is treated as an eligible 

rollover distribution; 

(ii) The IRA is an inherited IRA 

described in section 408(d)(3)(ii); and 

(iii) Section 401(a)(9)(B) (other than 

section 401(a)(9)(B)(iv)) will apply to 

the IRA. 

(3) Determination of amounts that 

constitute required minimum 

distributions for distributions to 

beneficiaries—(i) In general—(A) First 

portion of a distribution is treated as a 

required minimum distribution. If a 

minimum distribution is required to be 

made to a beneficiary in a calendar year, 

then the amounts distributed during 

that calendar year are treated as 

required minimum distributions under 

section 401(a)(9), to the extent that the 

total required minimum distribution 

under section 401(a)(9) for the calendar 

year has not been satisfied. Accordingly, 

those amounts are not eligible rollover 

distributions. If the employee dies 

before the employee’s required 

beginning date (within the meaning of 

§ 1.401(a)(9)–2(b)), then no amount is a 

required minimum distribution for the 

year in which the employee dies. 

(B) Determination of required 

minimum distribution based on 

distribution method. Except as 

otherwise provided in paragraphs 

(j)(3)(ii) and (iii) of this section, if an 

employee dies before the employee’s 

required beginning date, then the 

amount that is not an eligible rollover 

distribution because it is a required 

minimum distribution for the calendar 

year is determined under paragraph 

(j)(3)(i)(C), (D), or (E) of this section, 

whichever applies to the beneficiary. 

See § 1.401(a)(9)–3(b)(4) and (c)(5) to 

determine which rule applies. If an 

employee dies on or after the 

employee’s required beginning date, 

then the amount that is not an eligible 

rollover distribution because it is a 

required minimum distribution for a 

calendar year is determined under 

paragraph (j)(3)(i)(F) of this section. 

(C) Five-year rule. If the 5-year rule 

described in § 1.401(a)(9)–3(b)(2) or 

(c)(2) applies to the beneficiary, then no 

amount is required to be distributed 

until the end of the fifth calendar year 

following the calendar year of the 

employee’s death. In that year, the 

entire amount to which the beneficiary 

is entitled under the plan must be 

distributed, and because it is a required 

minimum distribution, it is not an 

eligible rollover distribution. Thus, if 

the 5-year rule applies with respect to 

a designated beneficiary, then any 

distribution made before the fifth 

calendar year following the calendar 

year of the employee’s death is eligible 

for rollover if it otherwise meets the 

requirements of this section. 

(D) Ten-year rule. If the 10-year rule 

described in § 1.401(a)(9)–3(c)(3) applies 

to the beneficiary, then no amount is 

required to be distributed until the end 

of the tenth calendar year following the 

calendar year of the employee’s death. 

In that year, the entire amount to which 

the beneficiary is entitled under the 

plan must be distributed, and because it 

is treated as a required minimum 

distribution, it is not an eligible rollover 

distribution. Thus, if the 10-year rule 

applies with respect to a designated 

beneficiary, then any distribution made 


jspears on DSK121TN23PROD with PROPOSALS3
10560 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

before the tenth calendar year following 

the calendar year of the employee’s 

death is eligible for rollover if it 

otherwise meets the requirements of this 

section. 

(E) Life expectancy rule. If the life 

expectancy rule described in 

§ 1.401(a)(9)–3(c)(4) (or, in the case of a 

defined benefit plan, the annuity 

payment rule described in § 1.401(a)(9)– 

3(b)(3)) applies to the designated 

beneficiary, then, in the first 

distribution calendar year for the 

beneficiary (as defined in § 1.401(a)(9)– 

5(a)(2)(ii)) and in each subsequent 

calendar year, the amount treated as a 

required minimum distribution and not 

eligible to be rolled over is determined 

in accordance in with § 1.401(a)(9)–5(d) 

and (e) (or, in the case of a defined 

benefit plan, § 1.401(a)(9)–6). 

(F) Employee dies on or after required 

beginning date. If the employee dies on 

or after the employee’s required 

beginning date, then, in the calendar 

year of the employee’s death, the 

amount treated as a required minimum 

distribution and not eligible to be rolled 

over is determined in accordance with 

§ 1.401(a)(9)–5(c) (or, in the case of a 

defined benefit plan, § 1.401(a)(9)–6). 

For each subsequent calendar year, the 

amount treated as a required minimum 

distribution and not eligible to be rolled 

over is determined in accordance with 

§ 1.401(a)(9)–5(d) and (e) (or, in the case 

of a defined benefit plan, § 1.401(a)(9)– 

6). 

(ii) Exception allowing beneficiary to 

change distribution method. If the 5- 

year rule or 10-year rule described in 

§ 1.401(a)(9)–3(b)(2), (c)(2) or (c)(3) 

applies to a designated beneficiary 

under the plan, and the eligible 

designated beneficiary is using the 

exception under § 1.408–8(d)(2)(ii) to 

switch to the use of the life expectancy 

rule under the IRA to which the 

distribution is rolled over or transferred, 

then the designated beneficiary must 

determine the portion of the distribution 

that is a required minimum distribution 

that is not eligible for rollover using the 

life expectancy rule described in 

§ 1.401(a)(9)–3(c)(4) (or, in the case of a 

defined benefit plan, the annuity 

payment rule described in § 1.401(a)(9)– 

3(b)(3)). 

(iii) Special rule applicable to a 

spouse beneficiary—(A) In general. This 

paragraph (j)(3)(iii) provides a special 

rule relating to the determination of 

amounts treated as a required minimum 

distribution for distributions to an 

employee’s surviving spouse to whom 

the 5-year rule or 10-year rule described 

in § 1.401(a)(9)–3(b)(2), (c)(2), or (c)(3) 

applies. This rule, which treats a 

portion of the distribution made before 

the last year of the 5-year or 10-year 

period (whichever applies to the 

spouse) as a required minimum 

distribution, applies if— 

(1) The distribution is made in or after 

the calendar year the surviving spouse 

attains age 72; and 

(2) The surviving spouse rolls over a 

portion of that distribution to an eligible 

retirement plan under which the 

surviving spouse is not treated as the 

beneficiary of the employee. 

(B) Catch-up of missed required 

minimum distributions. If this 

paragraph (j)(3)(iii) applies to a 

distribution then, notwithstanding 

paragraph (j)(3)(i)(C) and (D) of this 

section, the portion of the distribution 

that is not an eligible rollover 

distribution because it is treated as a 

required minimum distribution is the 

excess (if any) of— 

(1) The sum of the hypothetical 

required minimum distributions 

determined under paragraph (j)(3)(iii)(C) 

of this section for each year beginning 

with the first applicable calendar year 

(determined under paragraph 

(j)(3)(iii)(D) of this section) and ending 

with the calendar year in which the 

distribution is made, over 

(2) The distributions made to the 

surviving spouse during those calendar 

years. 

(C) Calculation of required minimum 

distribution for calendar years prior to 

calendar year of distribution. The 

hypothetical required minimum 

distribution for a calendar year 

described in this paragraph (j)(3)(iii)(C) 

is the amount that would have been the 

required minimum distribution for that 

year had the life expectancy rule 

applied to the surviving spouse. Thus, 

in the case of a defined contribution 

plan, the amount is calculated under 

§ 1.401(a)(9)–5, using the applicable 

denominator under § 1.401(a)(9)–5(d) 

(or, in the case of a defined benefit plan, 

calculated under § 1.401(a)(9)–6). 

However, an adjusted account balance is 

used to determine the required 

minimum distribution for a year under 

this paragraph (j)(3)(iii)(C). The adjusted 

account balance is determined by 

reducing the account balance that 

would otherwise be used by the excess 

(if any) of— 

(1) The sum of the hypothetical 

required minimum distributions 

determined under this paragraph 

(j)(3)(iii)(C) beginning with the first 

applicable year and ending with the 

calendar year preceding the calendar 

year of the determination, over 

(2) The distributions made to the 

surviving spouse during those calendar 

years. 

(D) Definition of first applicable year. 

The first applicable year is the later of— 

(1) The calendar year in which the 

surviving spouse attains age 72, and 

(2) The calendar year in which the 

employee would have attained age 72. 

(E) Example—(1) Facts. Employee A 

is a participant in Plan X, sponsored by 

Employer M. A died before A’s required 

beginning date having named A’s 

surviving spouse, B, as the sole 

beneficiary. Pursuant to the terms of 

Plan X, B is subject to the 10-year rule. 

B does not take a distribution of A’s 

entire interest in Plan X until the ninth 

calendar year following the year of A’s 

death, at which time B takes a 

distribution of A’s entire interest 

(valued at $100,000 as of December 31 

in the calendar year preceding the 

calendar year of distribution) when B is 

age 74 (and when A would have reached 

age 75). B would like to roll over the 

distribution to B’s own IRA to the extent 

the distribution does not constitute a 

required minimum distribution. 

(2) Catch-up of required minimum 

distributions required. Because the 

distribution is made in a calendar year 

after B attained age 72, this paragraph 

(j)(3)(iii) applies. The first applicable 

year (determined in accordance with 

paragraph (j)(3)(iii)(D) of this section) is 

the calendar year in which B reached 

age 72 (the seventh year after the year 

of A’s death). Pursuant to paragraph 

(j)(3)(iii)(B) of this section, the amount 

that is not an eligible rollover 

distribution because it is treated as a 

required minimum distribution under 

section 401(a)(9), is the sum of the 

hypothetical required minimum 

distributions, determined in accordance 

with paragraph (j)(3)(iii)(C) of this 

section for each calendar year beginning 

with the first applicable year and ending 

in the year of distribution. 

(3) Calculation of hypothetical 

required minimum distribution. 

Pursuant to paragraph (j)(3)(iii)(C) of 

this section, the amount treated as a 

required minimum distribution for the 

first applicable year is $5,813.95 

($100,000/17.2). For the next calendar 

year, the account balance as of the 

preceding calendar year is reduced by 

the required minimum distribution for 

that calendar year, in this case, 

$5,813.95. This calculation will be made 

for each calendar year until the calendar 

year of the distribution and the 

cumulative amount of those 

hypothetical required minimum 

distributions will be treated as a 

required minimum distribution under 

section 401(a)(9) and thus, not an 

eligible rollover distribution. 

(k) Other rules—(1) Designation must 

be irrevocable—(i) Indirect rollover. In 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10561 

order for a contribution of an eligible 

rollover distribution to an individual 

retirement plan to constitute a rollover 

and, thus, to qualify for exclusion from 

gross income under section 402(c), a 

distributee must elect, at the time the 

contribution is made, to treat the 

contribution as a rollover contribution. 

An election is made by designating to 

the trustee, issuer, or custodian of the 

eligible retirement plan that the 

contribution is a rollover contribution. 

This election is irrevocable. Once any 

portion of an eligible rollover 

distribution has been contributed to an 

individual retirement plan and 

designated as a rollover distribution, 

taxation of the withdrawal of the 

contribution from the individual 

retirement plan is determined under 

section 408(d) rather than under section 

402 or 403. Therefore, the eligible 

rollover distribution is not eligible for 

capital gains treatment, five-year or tenyear averaging, or the exclusion from 

gross income for net unrealized 

appreciation on employer stock. 

(ii) Direct rollover. If an eligible 

rollover distribution is paid to an 

eligible retirement plan in a direct 

rollover at the election of the 

distributee, the distributee is deemed to 

have irrevocably designated that the 

direct rollover is a rollover contribution. 

(2) Use of actual minimum required 

distribution calculation. The portion of 

any distribution that an employee (or 

spousal distributee) may roll over as an 

eligible rollover distribution under 

section 402(c) is determined based on 

the actual application of section 402 and 

other relevant provisions of the Internal 

Revenue Code. The actual application of 

these provisions may produce different 

results than any assumption described 

in § 1.401(a)(31)–1, Q&A–18 that is used 

by the plan administrator. Thus, for 

example, if the plan administrator 

assumes there is no designated 

beneficiary and calculates the portion of 

a distribution that is a required 

minimum distribution using the 

Uniform Life Table under § 1.401(a)(9)– 

9(c)(2), but the portion of the 

distribution that is actually a required 

minimum distribution and thus not an 

eligible rollover distribution is 

determined by taking into account a 

spousal designated beneficiary who is 

more than 10 years younger than the 

employee, then a greater portion of the 

distribution is actually an eligible 

rollover distribution and the distributee 

may roll over the additional amount. 

(3) Plan rollover not counted towards 

one rollover per year limitation. A 

distribution from a qualified plan that is 

rolled over to an individual retirement 

account or individual retirement 

annuity is not treated for purposes of 

section 408(d)(3)(B) as an amount 

received by an individual from an 

individual retirement account or 

individual retirement annuity that is not 

includible in gross income because of 

the application of section 408(d)(3). 

§ 1.402(c)–3. [Removed] 

■ Par. 5.Remove Section 1.402(c)–3. 

■ Par. 6.Amend § 1.403(b)–6 by revising 

paragraph (e) to read as follows: 

* * * * * 

(e) Minimum required distributions 

for eligible plans—(1) In general. Under 

section 403(b)(10), a section 403(b) 

contract must meet the minimum 

distribution requirements of section 

401(a)(9) (in both form and operation). 

See section 401(a)(9) for these 

requirements. 

(2) Generally treated as IRAs. For 

purposes of applying the minimum 

distribution requirements of section 

401(a)(9) to section 403(b) contracts, the 

minimum distribution requirements 

applicable to individual retirement 

annuities described in section 408(b) 

and individual retirement accounts 

described in section 408(a) apply to 

section 403(b) contracts. Consequently, 

except as otherwise provided in this 

paragraph (e), the minimum distribution 

requirements of section 401(a)(9) are 

applied to section 403(b) contracts in 

accordance with the provisions in 

§ 1.408–8. 

(3) Exceptions under which qualified 

plan rules will apply—(i) Required 

beginning date. The required beginning 

date for purposes of section 403(b)(10) 

is determined in accordance with 

§ 1.401(a)(9)–2(b) (rather than § 1.408– 

8(b)(1)). 

(ii) Amounts not taken into account. 

The amounts not taken into account in 

determining whether the minimum 

distribution requirement of section 

401(a)(9) has been satisfied for a 

calendar year are the amounts described 

in § 1.402(c)–2(c)(3) (rather than the 

amounts described in § 1.408–8(g)(2)). 

(iii) Qualifying longevity annuity 

contracts. The rules in § 1.401(a)(9)– 

6(q)(2)(i) (relating to limitations on 

premiums for a qualifying longevity 

annuity contract (QLAC), as defined in 

§ 1.401(a)(9)–6(q)(1)) and § 1.401(a)(9)– 

6(q)(4)(i)(A) (relating to reliance on 

representations with respect to a QLAC) 

apply to the purchase of a QLAC under 

a section 403(b) plan (rather than the 

rules in § 1.408–8(h)(2) and (3)). 

(4) Surviving spouse rule does not 

apply. The special rule in § 1.408–8(c) 

(relating to spousal beneficiaries 

permitting a surviving spouse to treat an 

IRA of the decedent as the spouse’s own 

IRA) does not apply to a section 403(b) 

contract. Thus, the surviving spouse of 

a participant is not permitted to treat a 

section 403(b) contract as the spouse’s 

own section 403(b) contract, even if the 

spouse is the sole beneficiary. 

(5) Retirement income accounts. For 

purposes of § 1.401(a)(9)–6(d) (relating 

to annuity contracts purchased under a 

defined contribution plan), annuity 

payments provided with respect to 

retirement income accounts do not fail 

to satisfy the requirements of section 

401(a)(9) merely because the payments 

are not made under an annuity contract 

purchased from an insurance company 

which is licensed to do business under 

the laws of the State, provided that the 

relationship between the annuity 

payments and the retirement income 

accounts is not inconsistent with any 

rules prescribed by the Commissioner in 

revenue rulings, notices, or other 

guidance published in the Internal 

Revenue Bulletin (see § 601.601(d) of 

this chapter). See also § 1.403(b)–9(a)(5) 

for additional rules relating to annuities 

payable from a retirement income 

account. 

(6) Special rules for benefits accruing 

before December 31, 1986—(i) Nonapplicability of section 401(a)(9) to pre- 

’87 account balance. The minimum 

distribution requirements of section 

401(a)(9) do not apply to the 

undistributed portion of the account 

balance under a section 403(b) contract 

valued as of December 31, 1986, 

exclusive of subsequent earnings (pre- 

’87 account balance). The minimum 

distribution requirements of section 

401(a)(9) apply to all benefits under any 

section 403(b) contract accruing after 

December 31, 1986 (post-’86 account 

balance), including earnings after 

December 31, 1986. Consequently, the 

post-’86 account balance includes 

earnings after December 31, 1986, on 

contributions made before January 1, 

1987, in addition to the contributions 

made after December 31, 1986, and 

earnings thereon. 

(ii) Recordkeeping required. The 

issuer or custodian of the section 403(b) 

contract must keep records that enable 

it to identify the pre-’87 account balance 

and subsequent changes as set forth in 

paragraph (d)(6)(iii) of this section and 

provide that information upon request 

to the relevant employee or beneficiaries 

with respect to the contract. If the issuer 

or custodian does not keep those 

records, the entire account balance is 

treated as subject to section 401(a)(9). 

(iii) Applicability of section 401(a)(9) 

to post-’86 account balance. In applying 

the minimum distribution requirements 

of section 401(a)(9), only the post-’86 

account balance is used to calculate the 

required minimum distribution for a 


jspears on DSK121TN23PROD with PROPOSALS3
10562 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

calendar year. The amount of any 

distribution from a contract is treated as 

being paid from the post-’86 account 

balance to the extent the distribution is 

required to satisfy the minimum 

distribution requirement with respect to 

that contract for a calendar year. Any 

amount distributed in a calendar year 

from a contract in excess of the required 

minimum distribution for a calendar 

year with respect to that contract is 

treated as paid from the pre-’87 account 

balance, if any, of that contract. 

(iv) Rollover of amounts from pre-’87 

account balance. If an amount is 

distributed from the pre-’87 account 

balance and rolled over to another 

section 403(b) contract, the amount is 

treated as part of the post-’86 account 

balance in that second contract. 

However, if the pre-’87 account balance 

under a section 403(b) contract is 

directly transferred to another section 

403(b) contract (as permitted under 

§ 1.403(b)–10(b)), the amount 

transferred retains its character as a pre- 

’87 account balance, provided the issuer 

of the transferee contract satisfies the 

recordkeeping requirements of 

paragraph (e)(6)(ii) of this section. 

(v) Relevance of distinction between 

pre-’87 and post-’86 account balance for 

purposes of section 72. The distinction 

between the pre-’87 account balance 

and the post-’86 account balance 

provided for under this paragraph (e)(6) 

of this section has no relevance for 

purposes of determining the portion of 

a distribution that is includible in 

income under section 72. 

(vi) Pre-’87 account balance 

distributions must satisfy incidental 

benefit requirement. The pre-’87 

account balance must be distributed in 

accordance with the incidental benefit 

requirement of § 1.401–1(b)(1)(i). 

Distributions attributable to the pre-’87 

account balance are treated as satisfying 

this requirement if all distributions from 

the section 403(b) contract (including 

distributions attributable to the post-’86 

account balance) satisfy the 

requirements of § 1.401–1(b)(1)(i) 

without regard to this section, and 

distributions attributable to the post-’86 

account balance satisfy the rules of this 

paragraph (e) (without regard to this 

paragraph (e)(6)). Distributions 

attributable to the pre-’87 account 

balance are treated as satisfying the 

incidental benefit requirement if all 

distributions from the section 403(b) 

contract (including distributions 

attributable to both the pre-’87 account 

balance and the post-’86 account 

balance) satisfy the rules of this 

paragraph (e) (without regard to this 

paragraph (e)(6)). 

(7) Application to multiple contracts 

for an employee. The required 

minimum distribution must be 

determined separately for each section 

403(b) contract of an employee. 

However, because, as provided in 

paragraph (e)(2) of this section, the 

minimum distribution requirements of 

section 401(a)(9) apply to section 403(b) 

contracts in accordance with the 

provisions in § 1.408–8, the required 

minimum distribution from one section 

403(b) contract of an employee is 

permitted to be distributed from another 

section 403(b) contract in order to 

satisfy the minimum distribution 

requirements of section 401(a)(9). Thus, 

as provided in § 1.408–8(e), with respect 

to IRAs, the required minimum 

distribution amount from each contract 

is then totaled and the total minimum 

distribution taken from any one or more 

of the individual section 403(b) 

contracts. However, consistent with the 

rules in § 1.408–8(e), only amounts in 

section 403(b) contracts that an 

individual holds as an employee may be 

aggregated. In addition, amounts in 

section 403(b) contracts that a person 

holds as a beneficiary of a decedent may 

be aggregated, but those amounts may 

not be aggregated with amounts held in 

section 403(b) contracts that the person 

holds as the employee or as the 

beneficiary of another decedent. 

Distributions from section 403(b) 

contracts do not satisfy the minimum 

distribution requirements for IRAs, nor 

do distributions from IRAs satisfy the 

minimum distribution requirements for 

section 403(b) contracts. 

(8) Governmental plans. A section 

403(b) contract that is part of a 

governmental plan (within the meaning 

of section 414(d)) is treated as having 

complied with section 401(a)(9) for all 

years to which section 401(a)(9) applies 

to the contract, if the terms of the 

contract reflect a reasonable, good faith 

interpretation of section 401(a)(9). 

(9) Effective date. This paragraph (e) 

applies for purposes of determining 

required minimum distributions for 

calendar years beginning on or after 

January 1, 2022. For earlier calendar 

years, the rules of 26 CFR 1.403(b)–6(e) 

(revised as of April 1, 2021) apply. 

* * * * * 

■ Par. 7.Revise § 1.408–8 to read as 

follows: 

§ 1.408–8 Distribution requirements for 

individual retirement plans. 

(a) Applicability of section 401(a)(9)— 

(1) In general. An IRA is subject to the 

required minimum distribution 

requirements of section 401(a)(9). In 

order to satisfy section 401(a)(9), the 

rules of §§ 1.401(a)(9)–1 through 

1.401(a)(9)–9 must be applied, except as 

otherwise provided in this section. For 

example, if the owner of an individual 

retirement account dies before the IRA 

owner’s required beginning date, 

whether the 10-year rule or the life 

expectancy rule applies to distributions 

after the IRA owner’s death is 

determined in accordance with 

§ 1.401(a)(9)–3(c), and the rules of 

§ 1.401(a)(9)–4 apply for purposes of 

determining an IRA owner’s designated 

beneficiary. Similarly, the amount of the 

minimum distribution required for each 

calendar year from an individual 

account is determined in accordance 

with § 1.401(a)(9)–5. 

(2) Definition of IRA and IRA owner. 

For purposes of this section, an IRA is 

an individual retirement account or 

annuity described in section 408(a) or 

(b), and the IRA owner is the individual 

for whom an IRA is originally 

established by contributions for the 

benefit of that individual and that 

individual’s beneficiaries. 

(3) Substitution of specific terms. For 

purposes of applying the required 

minimum distribution rules of 

§§ 1.401(a)(9)–1 through 1.401(a)(9)–9, 

the IRA trustee, custodian, or issuer is 

treated as the plan administrator, and 

the IRA owner is substituted for the 

employee. 

(4) Treatment of SEPs and SIMPLE 

IRA Plans. IRAs that receive employer 

contributions under a SEP arrangement 

(within the meaning of section 408(k)) 

or a SIMPLE IRA plan (within the 

meaning of section 408(p)) are treated as 

IRAs, rather than employer plans, for 

purposes of section 401(a)(9) and are, 

therefore, subject to the distribution 

rules in this section. 

(b) Different rules for IRAs and 

qualified plans—(1) Determination of 

required beginning date—(i) In general. 

An IRA owner’s required beginning date 

is determined using the rules for 

employees who are 5% owners under 

§ 1.401(a)(9)–2(b)(3). Thus, the IRA 

owner’s required beginning date is April 

1 of the calendar year following the 

calendar year in which the individual 

attains age 72 (or 701⁄2 in the case of an 

IRA owner born before July 1, 1949). 

(ii) Special rules for Roth IRAs. No 

minimum distributions are required to 

be made from a Roth IRA while the 

owner is alive. After the Roth IRA 

owner dies, the required minimum 

distribution rules apply to the Roth IRA 

as though the Roth IRA owner died 

before his or her required beginning 

date. If the sole beneficiary is the Roth 

IRA owner’s surviving spouse, then the 

surviving spouse may delay 

distributions until the Roth IRA owner 

would have attained age 72 (or 701⁄2 in 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10563 

the case of a Roth IRA owner born 

before July 1, 1949). 

(2) Account balance determination. 

For purposes of determining the 

required minimum distribution from an 

IRA for any calendar year, the account 

balance of the IRA as of December 31 of 

the calendar year preceding the calendar 

year for which distributions are required 

to be made is substituted for the account 

balance of the employee under 

§ 1.401(a)(9)–5(b). Except as provided in 

paragraph (d) of this section, no 

adjustments are made for contributions 

or distributions after that date. 

(3) Determination of portion of 

distribution that is a required minimum 

distribution. The portion of a 

distribution from an IRA that is a 

required minimum distribution and 

thus not eligible for rollover is 

determined in the same manner as 

provided in §§ 1.402(c)–2(f) and (j)(3) 

for a distribution from a qualified plan. 

For example, if a minimum distribution 

to an IRA owner is required under 

section 401(a)(9)(A)(ii) for a calendar 

year, any amount distributed during a 

calendar year from an IRA of that IRA 

owner is treated as a required minimum 

distribution under section 401(a)(9) to 

the extent that the total required 

minimum distribution for the year 

under section 401(a)(9) from all of that 

IRA owner’s IRAs has not been satisfied 

(either by a distribution from the IRA or, 

as permitted under paragraph (e) of this 

section, from another IRA). 

(c) Surviving spouse treating IRA as 

own—(1) Election generally permitted— 

(i) In general. The surviving spouse of 

an individual may elect, in the manner 

described in paragraph (c)(2) of this 

section, to treat the surviving spouse’s 

entire interest as a beneficiary in the 

individual’s IRA (or the remaining part 

of that interest if distributions have 

begun) as the surviving spouse’s own 

IRA. 

(ii) Timing of election. The election 

described in this paragraph (c)(1) may 

not be made after the later of— 

(A) The calendar year in which the 

surviving spouse reaches age 72; and 

(B) The calendar year following the 

calendar year of the individual’s death. 

(iii) Eligibility to make election. In 

order to make the election described in 

this paragraph (c)(1), the surviving 

spouse must be the sole beneficiary of 

the IRA and have an unlimited right to 

withdraw amounts from the IRA. If a 

trust is named as beneficiary of the IRA, 

this requirement is not satisfied even if 

the surviving spouse is the sole 

beneficiary of the trust. 

(2) Election procedures. The election 

described in paragraph (c)(1) of this 

section is made by the surviving spouse 

redesignating the account as an account 

in the name of the surviving spouse as 

IRA owner rather than as beneficiary. 

Alternatively, a surviving spouse 

eligible to make the election is deemed 

to have made the election if, at any time, 

either of the following occurs— 

(i) Any amount in the IRA that would 

be required to be distributed to the 

surviving spouse as beneficiary under 

section 401(a)(9)(B) is not distributed 

within the time period required under 

section 401(a)(9)(B); or 

(ii) A contribution (other than a 

rollover of a distribution from an 

eligible retirement plan of the decedent) 

is made to the IRA. 

(3) Effect of election. Following an 

election described in paragraph (c)(1) of 

this section, the surviving spouse is 

considered the IRA owner for whose 

benefit the trust is maintained for all 

purposes under the Internal Revenue 

Code (including section 72(t)). Thus, for 

example, the required minimum 

distribution for the calendar year of the 

election and each subsequent calendar 

year is determined under section 

401(a)(9)(A) with the spouse as IRA 

owner and not section 401(a)(9)(B) with 

the surviving spouse as the deceased 

IRA owner’s beneficiary. However, if the 

election is made in the calendar year 

during which the IRA owner’s death 

occurs, the spouse is not required to 

take a required minimum distribution as 

the IRA owner for that calendar year. 

Instead, the spouse is required to take a 

required minimum distribution for that 

year, determined with respect to the 

deceased IRA owner under the rules of 

§ 1.401(a)(9)–5(c), to the extent the 

distribution was not made to the IRA 

owner before death. 

(d) Treatment of rollovers and 

transfers—(1) Treatment of rollovers— 

(i) In general. If a distribution is rolled 

over to an IRA, then the rules in 

§ 1.401(a)(9)–7 apply for purposes of 

determining the account balance and 

the required minimum distribution for 

that IRA. However, because the value of 

the account balance is determined as of 

December 31 of the year preceding the 

year for which the required minimum 

distribution is being determined, and 

not as of a valuation date in the 

preceding year, the account balance of 

the IRA is adjusted only if the amount 

rolled over is not received in the 

calendar year in which the amount was 

distributed. If the amount rolled over is 

received in the calendar year following 

the calendar year in which the amount 

was distributed, then, for purposes of 

determining the required minimum 

distribution for that following calendar 

year, the account balance of the IRA as 

of December 31 of the calendar year in 

which the distribution was made must 

be adjusted by the amount received in 

accordance with § 1.401(a)(9)–7(b). 

(ii) Spousal rollovers. A surviving 

spouse is permitted to roll over a 

distribution to an IRA as the beneficiary 

of the deceased employee or IRA owner, 

and the rules of paragraph (d)(1)(i) of 

this section apply to that IRA. A 

surviving spouse may also elect to treat 

that IRA as the spouse’s own IRA in 

accordance with paragraph (c) of this 

section. 

(2) Special rules for death before 

required beginning date—(i) Carryover 

of election under qualified plan or IRA. 

If an employee or IRA owner dies before 

the required beginning date and the 

surviving spouse rolls over a 

distribution of the employee’s or IRA 

owner’s interest to an IRA in the 

spouse’s capacity as a beneficiary of the 

deceased employee or IRA owner, then, 

except as provided in paragraph 

(d)(2)(ii) of this section, the method for 

determining required minimum 

distributions that applied to that 

surviving spouse under the distributing 

plan or IRA (such as when a beneficiary 

makes an election described in 

§ 1.401(a)(9)–3(c)(5)(iii)) also applies to 

the receiving IRA. Thus, for example, if 

an employee who died before the 

required beginning date designated the 

employee’s surviving spouse as a 

beneficiary of the employee’s interest in 

the plan and the plan provides that the 

surviving spouse is subject to the 10- 

year rule described in § 1.401(a)(9)– 

3(c)(4), then the 10-year rule also 

applies to any IRA in the name of the 

decedent that receives a rollover of the 

employee’s interest. 

(ii) Change from 5-year rule or 10-year 

rule to life expectancy payments. If the 

5-year rule or 10-year rule described in 

§ 1.401(a)(9)–3(b)(2), (c)(2), or (c)(3), 

respectively, applies to a distributing 

plan or IRA and a distribution is made 

to the employee’s surviving spouse 

before the deadline described in 

§ 1.401(a)(9)–3(b)(4)(iii) or (c)(5)(iii) that 

would have applied had the distributing 

plan or IRA permitted the surviving 

spouse to make an election between the 

5-year rule or 10-year rule and the life 

expectancy rule (or, in the case of a 

defined benefit plan, the annuity 

payment rule), then the surviving 

spouse may elect to have the life 

expectancy rule described in 

§ 1.401(a)(9)–3(c)(4) or the annuity 

payment rule described in § 1.401(a)(9)– 

3(b)(3) apply to any IRA to which any 

portion of that distribution is rolled 

over. However, see § 1.402(c)–2(j)(3)(ii) 

to determine the portion of that 

distribution that is treated as a required 

minimum distribution in the calendar 


jspears on DSK121TN23PROD with PROPOSALS3
10564 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

year of the distribution and thus is not 

eligible for rollover. 

(iii) Spousal rollover to spouse’s own 

IRA. If an employee or IRA owner dies 

before the required beginning date and 

the surviving spouse rolls over a 

distribution described in paragraph 

(d)(2)(i) of this section from the 

surviving spouse’s IRA in the capacity 

as the beneficiary of the decedent to the 

surviving spouse’s own IRA, then, in 

determining the amount that is treated 

as a required minimum distribution 

under section 401(a)(9) and thus is not 

eligible for rollover, the rules of 

§ 1.402(c)–2(j)(3)(iii) are applied as if the 

distribution was made directly from the 

decedent’s interest in the plan or IRA to 

the surviving spouse’s own IRA. 

(3) Applicability of rollover rules to 

non-spouse beneficiary. The rules of 

paragraphs (d)(1), (d)(2)(i) and (d)(2)(ii) 

of this section apply to a non-spouse 

beneficiary who makes an election to 

have a distribution made in the form of 

a direct trustee-to-trustee transfer as 

described in section 402(c)(11) in the 

same manner as a rollover of a 

distribution made by a surviving 

spouse. 

(4) Treatment of transfers. In the case 

of a trustee-to-trustee transfer from one 

IRA to another IRA that is not a 

distribution and rollover, the transfer is 

not treated as a distribution by the 

transferor IRA for purposes of section 

401(a)(9). Accordingly, the minimum 

distribution requirement with respect to 

the transferor IRA must still be satisfied. 

After the transfer, the employee’s 

account balance and the required 

minimum distribution under the 

transferee IRA are determined in the 

same manner that an account balance 

and required minimum distribution are 

determined under an IRA receiving a 

rollover contribution under paragraph 

(d)(1) of this section. 

(e) Owners of multiple IRAs—(1) In 

general. The required minimum 

distribution from one IRA is permitted 

to be distributed from another IRA in 

order to satisfy section 401(a)(9), subject 

to the limitations of paragraph (e)(2) and 

(3) of this section. The required 

minimum distribution must be 

calculated separately for each IRA and 

the separately calculated amounts may 

then be totaled and the total distribution 

taken from any one or more of the IRAs 

under the rules set forth in this 

paragraph (e). 

(2) IRAs must be of the same owner. 

Generally, only amounts in IRAs that an 

individual holds as the IRA owner may 

be aggregated. Except in the case of a 

surviving spouse electing to treat a 

decedent’s IRA as the spouse’s own IRA, 

an IRA that a beneficiary acquires as a 

result of the death of an individual is 

not treated as an IRA of the beneficiary 

but rather as an IRA of the decedent for 

purposes of this paragraph (e). Thus, for 

example, for purposes of satisfying the 

minimum distribution requirements 

with respect to one IRA by making 

distributions from another IRA, IRAs for 

which the individual is the IRA owner 

are not aggregated with IRAs for which 

the individual is a beneficiary. In 

addition, IRAs that a person holds as a 

beneficiary of a decedent may be 

aggregated, but those amounts may not 

be aggregated with IRAs that the person 

holds as the owner or as the beneficiary 

of another decedent. 

(3) Non-Roth IRAs are treated 

separately from section 403(b) contracts 

and Roth IRAs. Distributions from an 

IRA that is not a Roth IRA may not be 

used to satisfy the required minimum 

distribution requirements with respect 

to a Roth IRA, or a section 403(b) 

contract (as defined in § 1.403(b)– 

2(b)(16)(i)). Similarly, distributions from 

a Roth IRA do not satisfy the required 

minimum distribution requirements 

with respect to a section 403(b) contract 

or an IRA that is not a Roth IRA. In 

addition, distributions from a section 

403(b) contract do not satisfy the 

required minimum distribution 

requirements with respect to an IRA. 

(f) Reporting requirements. The 

trustee, custodian, or issuer of an IRA is 

required to report information with 

respect to the minimum amount 

required to be distributed from the IRA 

for each calendar year to individuals or 

entities, at the time, and in the manner, 

prescribed by the Commissioner in 

revenue rulings, notices, and other 

guidance published in the Internal 

Revenue Bulletin (see § 601.601(d) of 

this chapter), as well as the applicable 

Federal tax forms and accompanying 

instructions. 

(g) Distributions taken into account— 

(1) General rule. Except as provided in 

paragraph (g)(2) of this section, all 

amounts distributed from an IRA are 

taken into account in determining 

whether section 401(a)(9) is satisfied, 

regardless of whether the amount is 

includible in income. 

(2) Amounts not taken into account. 

The following amounts are not taken 

into account in determining whether the 

required minimum distribution with 

respect to an IRA for a calendar year has 

been made— 

(i) Contributions returned pursuant to 

section 408(d)(4), together with the 

income allocable to these contributions; 

(ii) Contributions returned pursuant 

to section 408(d)(5); 

(iii) Corrective distributions of excess 

simplified employee pension 

contributions under section 

408(k)(6)(C), together with the income 

allocable to these distributions; 

(iv) Amounts that are treated as 

distributed pursuant to section 408(e); 

(v) Amounts that are deemed to be 

distributed with respect to collectibles 

pursuant to section 408(m); 

(vi) Corrective distributions of excess 

deferrals as described in § 1.402(g)– 

1(e)(3), together with the income 

allocable to these corrective 

distributions; and 

(vii) Similar items designated by the 

Commissioner in revenue rulings, 

notices, and other guidance published 

in the Internal Revenue Bulletin. See 

§ 601.601(d) of this chapter. 

(h) Qualifying longevity annuity 

contracts—(1) General rule. The special 

rule in § 1.401(a)(9)–5(b)(4) for a QLAC, 

defined in § 1.401(a)(9)–6(q), applies to 

an IRA, subject to the modifications set 

forth in this paragraph (h). 

(2) Limitations on premiums—(i) In 

general. In lieu of the limitations on 

premiums described in § 1.401(a)(9)– 

6(q)(2)(i), the limitation on premiums 

paid with respect to the contract on a 

date is the lesser of— 

(A) The dollar limitation in paragraph 

(h)(2)(ii) of this section; and 

(B) The percentage limitation in 

paragraph (h)(2)(iii) of this section. 

(ii) Dollar limitation. The dollar 

limitation is the amount by which 

$125,000 (as adjusted under 

§ 1.401(a)(9)–6(q)(4)(ii)(A)) exceeds the 

sum of— 

(A) The premiums paid before that 

date with respect to the contract, and 

(B) The premiums paid on or before 

that date with respect to any other 

contract that is intended to be a QLAC 

and that is purchased for the IRA owner 

under the IRA, or any other plan, 

annuity, or account described in section 

401(a), 403(a), 403(b), or 408 or eligible 

governmental plan under section 457(b). 

(iii) Percentage limitation. The 

percentage limitation is the amount by 

which 25 percent of the total account 

balances of the IRAs (other than Roth 

IRAs) that an individual holds as the 

IRA owner (including the value of any 

QLAC held under those IRAs) as of 

December 31 of the calendar year 

preceding the calendar year in which a 

premium is paid, exceeds the sum of— 

(A) The premiums paid before that 

date with respect to the contract, and 

(B) The premiums paid on or before 

that date with respect to any other 

contract that is intended to be a QLAC 

and that is held or was purchased for 

the individual under those IRAs. 

(3) Reliance on representations. For 

purposes of the limitations described in 

paragraphs (h)(2)(ii) and (iii) of this 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10565 

section, unless the trustee, custodian, or 

issuer of an IRA has actual knowledge 

to the contrary, the trustee, custodian, or 

issuer may rely on the IRA owner’s 

representation (made in writing or other 

form as may be prescribed by the 

Commissioner) of— 

(i) The amount of the premiums 

described in paragraphs (h)(2)(ii) and 

(iii) of this section that are not paid 

under the IRA, and 

(ii) The amount of the account 

balances described in paragraph 

(h)(2)(iii) of this section (other than the 

account balance under the IRA). 

(4) Permitted delay in setting 

beneficiary designation. In the case of a 

contract that is rolled over from a plan 

to an IRA before the required beginning 

date under the plan, the contract will 

not violate the rule in § 1.401(a)(9)– 

6(q)(3)(iii)(F) that a non-spouse 

beneficiary must be irrevocably selected 

on or before the later of the date of 

purchase or the required beginning date 

under the IRA, provided that the 

contract requires a beneficiary to be 

irrevocably selected by the end of the 

year following the year of the rollover. 

(5) Roth IRAs. The rule in 

§ 1.401(a)(9)–5(b)(4) does not apply to a 

Roth IRA. Accordingly, a contract that is 

purchased under a Roth IRA is not 

treated as a contract that is intended to 

be a QLAC for purposes of applying the 

dollar and percentage limitation rules in 

paragraphs (h)(2)(ii) and (iii) of this 

section. If a QLAC is purchased or held 

under a plan, annuity, account, or 

traditional IRA, and that contract is later 

rolled over or converted to a Roth IRA, 

the contract is not treated as a contract 

that is intended to be a QLAC after the 

date of the rollover or conversion. Thus, 

premiums paid with respect to the 

contract will not be taken into account 

under paragraph (h)(2)(ii) and (iii) of 

this section after the date of the rollover 

or conversion. 

(i) [Reserved]. 

(j) Applicability date. This section 

applies for purposes of determining 

required minimum distributions for 

calendar years beginning on or after 

January 1, 2022. For earlier calendar 

years, the rules of 26 CFR 1.408–8 

(revised as of April 1, 2021) apply. 

■ Par. 8. Amend § 1.457–6 by revising 

paragraph (d) to remove the last 

sentence. 

PART 54—PENSION EXCISE TAXES 

■ Par. 9. The authority citation for part 

54 continues to read in part as follows: 

Authority: 26 U.S.C. 7805. 

■ Par. 10. Revise § 54.4974–1 to read as 

follows: 

§ 54.4974–1 Excise tax on accumulations 

in qualified retirement plans. 

(a) Imposition of excise tax. If the 

amount distributed to a payee under any 

qualified retirement plan or any eligible 

deferred compensation plan (as defined 

in section 457(b)) for a calendar year is 

less than the required minimum 

distribution for that year, section 4974 

imposes an excise tax on the payee for 

the taxable year beginning with or 

within the calendar year during which 

the amount is required to be distributed. 

The tax is equal to 50 percent of the 

amount by which the required 

minimum distribution exceeds the 

actual amount distributed during the 

calendar year. Section 4974 provides 

that this tax shall be paid by the payee. 

For purposes of section 4974, the term 

required minimum distribution means 

the minimum amount required to be 

distributed pursuant to section 

401(a)(9), 403(b)(10), 408(a)(6), 

408(b)(3), or 457(d)(2), as the case may 

be. Except as otherwise provided in 

paragraph (f) of this section (which 

provides a special rule for amounts 

required to be distributed by an 

employee’s, or an individual’s, required 

beginning date), the required minimum 

distribution for a calendar year is the 

required minimum distribution amount 

required to be distributed during the 

calendar year. 

(b) Definition of qualified retirement 

plan. For purposes of section 4974, each 

of the following is a qualified retirement 

plan— 

(1) A plan described in section 401(a) 

that includes a trust exempt from tax 

under section 501(a); 

(2) An annuity plan described in 

section 403(a); 

(3) An annuity contract, custodial 

account, or retirement income account 

described in section 403(b); 

(4) An individual retirement account 

described in section 408(a) (including a 

Roth IRA described in section 408A); 

(5) An individual retirement annuity 

described in section 408(b) (including a 

Roth IRA described in section 408A); or 

(6) Any other plan, contract, account, 

or annuity that, at any time, has been 

treated as a plan, account, or annuity 

described in paragraphs (b)(1) through 

(5) of this section but that no longer 

satisfies the applicable requirements for 

that treatment. 

(c) Determination of required 

minimum distribution for individual 

accounts—(1) General rule. Except as 

otherwise provided in this paragraph 

(c), if a payee’s interest under a 

qualified retirement plan or any eligible 

deferred compensation plan is in the 

form of an individual account (and 

distribution of that account is not being 

made under an annuity contract 

purchased in accordance with 

§ 1.401(a)(9)–5(a)(5) and § 1.401(a)(9)– 

6(d)), the amount of the required 

minimum distribution for any calendar 

year for purposes of section 4974 is the 

amount required to be distributed to 

that payee for that calendar year 

determined in accordance with 

§ 1.401(a)(9)–5 as provided in the 

following (whichever is applicable)— 

(i) Section 401(a)(9), §§ 1.401(a)(9)–1 

through 1.401(a)(9)–5, and 1.401(a)(9)–7 

through 1.401(a)(9)–9, in the case of a 

plan described in section 401(a) that 

includes a trust exempt under section 

501(a) or an annuity plan described in 

section 403(a); 

(ii) Section 403(b)(10) and § 1.403(b)– 

6(e) in the case of an annuity contract, 

custodial account, or retirement income 

account described in section 403(b); 

(iii) Section 408(a)(6) or (b)(3) and 

§ 1.408–8 in the case of an individual 

retirement account or annuity described 

in section 408(a) or (b); or 

(iv) Section 457(d) and § 1.457–6(d) in 

the case of an eligible deferred 

compensation plan. 

(2) Distributions under 5-year rule or 

10-year rule. If an employee dies before 

the required beginning date and either 

§ 1.401(a)(9)–3(c)(2) or (3) applies to the 

employee’s beneficiary, there is no 

required minimum distribution until the 

end of the calendar year described in 

whichever of those paragraphs applies 

to the beneficiary (that is, the fifth year 

or the tenth year after the calendar year 

of the employee’s death, as applicable). 

The required minimum distribution due 

in that fifth or tenth calendar year is the 

employee’s entire interest in the plan. 

(3) Default provisions. Unless 

otherwise provided under the qualified 

retirement plan or eligible deferred 

compensation plan (or, if applicable, the 

governing instrument of the plan), the 

default provisions in § 1.401(a)(9)– 

3(c)(5)(i) apply in determining whether 

paragraph (c)(1) or (c)(2) of this section 

applies. 

(d) Determination of required 

minimum distribution under a defined 

benefit plan or annuity—(1) General 

rule. If a payee’s interest in a qualified 

retirement plan or eligible deferred 

compensation plan is being distributed 

in the form of an annuity (either directly 

from the plan, in the case of a defined 

benefit plan, or under an annuity 

contract purchased from an insurance 

company), then the amount of the 

required minimum distribution for 

purposes of section 4974 depends on 

whether the annuity is a permissible 

annuity distribution option or an 

impermissible annuity distribution 

option. For this purpose— 


jspears on DSK121TN23PROD with PROPOSALS3
10566 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 

(i) A permissible annuity distribution 

option is an annuity contract (or, in the 

case of annuity distributions from a 

defined benefit plan, a distribution 

option) that specifically provides for 

distributions that, if made as provided, 

would for every calendar year equal or 

exceed the minimum distribution 

amount required to be distributed to 

satisfy the applicable section 

enumerated in paragraph (b) of this 

section for that calendar year; and 

(ii) An impermissible annuity 

distribution option is any other annuity 

distribution option. 

(2) Permissible annuity distribution 

option. If the annuity contract (or, in the 

case of annuity distributions from a 

defined benefit plan, a distribution 

option) under which distributions to the 

payee are being made is a permissible 

annuity distribution option, then the 

required minimum distribution for a 

given calendar year for purposes of 

section 4974 equals the amount that the 

annuity contract (or distribution option) 

provides is to be distributed for that 

calendar year. 

(3) Impermissible annuity distribution 

option—(i) General rule. If the annuity 

contract (or, in the case of annuity 

distributions from a defined benefit 

plan, the distribution option) under 

which distributions to the payee are 

being made is an impermissible annuity 

distribution option, then the required 

minimum distribution for each calendar 

year for purposes of section 4974 is the 

amount that would be distributed under 

the applicable permissible annuity 

distribution option described in this 

paragraph (d)(3) (or the amount 

determined by the Commissioner if 

there is no option of this type). The 

determination of which permissible 

annuity distribution applies depends on 

whether distributions commenced 

before the death of the employee, 

whether the plan is a defined benefit or 

defined contribution plan, whether 

there is a designated beneficiary for 

purposes of section 401(a)(9), and 

whether the designated beneficiary is an 

eligible designated beneficiary under 

section 401(a)(9)(E)(ii). For this purpose, 

the determination of whether there is a 

designated beneficiary and whether that 

designated beneficiary is an eligible 

designated beneficiary is made in 

accordance with § 1.401(a)(9)–4, and the 

determination of which designated 

beneficiary’s life is to be used in the 

case of multiple designated beneficiaries 

in made in accordance with 

§ 1.401(a)(9)–5(f). 

(ii) Defined benefit plan—(A) Benefits 

commence before employee dies. If the 

plan under which distributions are 

being made is a defined benefit plan, 

benefits commence before the employee 

dies, and there is a designated 

beneficiary, then the applicable 

permissible annuity distribution option 

is the joint and survivor annuity option 

under the plan for the lives of the 

employee and the designated 

beneficiary that is a permissible annuity 

distribution option and that provides for 

the greatest level amount payable to the 

employee determined on an annual 

basis. If the plan does not provide an 

option described in the preceding 

sentence (or there is no designated 

beneficiary under the impermissible 

annuity distribution option), then the 

applicable permissible annuity 

distribution option is the life annuity 

option under the plan payable for the 

life of the employee in level amounts 

with no survivor benefit. 

(B) Employee dies before benefits 

commence. If the plan under which 

distributions are being made is a 

defined benefit plan, the employee dies 

before benefits commence, there is a 

designated beneficiary, and the plan has 

a life annuity option payable for the life 

of the designated beneficiary in level 

amounts, then the applicable 

permissible annuity distribution option 

is that life annuity option. If there is no 

designated beneficiary, then the 5-year 

rule in section 401(a)(9)(B)(ii) applies in 

accordance with paragraph (d)(4)(i) of 

this section. 

(iii) Defined contribution plan—(A) In 

general. If the plan under which 

distributions are being made is a 

defined contribution plan and the 

impermissible annuity distribution 

option is an annuity contract purchased 

from an insurance company, then the 

applicable permissible annuity 

distribution option is the applicable 

annuity described in paragraph 

(d)(3)(iii)(B) or (C) of this section that 

could have been purchased with the 

portion of the employee’s or 

individual’s account that was used to 

purchase the annuity contract that is the 

impermissible annuity distribution 

option. The amount of the payments 

under that annuity contract are 

determined using the interest rate 

prescribed under section 7520 

determined as of the date the contract 

was purchased, the ages of the 

annuitants on that date, and the 

mortality rates in § 1.401(a)(9)–9(e). 

(B) Benefits commence before 

employee dies. If the plan under which 

distributions are being made is a 

defined contribution plan, the benefits 

commence before the employee dies, 

and there is a designated beneficiary 

who is an eligible designated 

beneficiary within the meaning of 

section 401(a)(9)(E)(ii), then the 

applicable annuity is the joint and 

survivor annuity option providing level 

annual payments for the lives of the 

employee and the designated 

beneficiary, under which the amount of 

the periodic payment that would have 

been payable to the survivor is the 

applicable percentage under the table in 

§ 1.401(a)(9)–6(b)(2) (taking into account 

the rules of § 1.401(a)(9)–6(k)(2)) of the 

amount of the periodic payment that 

would have been payable to the 

employee or individual. If there is no 

designated beneficiary, or if the 

designated beneficiary is not an eligible 

designated beneficiary under the 

impermissible distribution option, then 

the annuity described in this paragraph 

(d)(3)(iii)(B) is a life annuity for the life 

of the employee with no survivor 

benefit that provides level annual 

payments. 

(C) Employee dies before benefits 

commence. If the plan under which 

distributions are being made is a 

defined contribution plan, the employee 

dies before benefits commence, and 

there is an eligible designated 

beneficiary under the impermissible 

annuity distribution option, then the 

applicable annuity is a life annuity for 

the life of the designated beneficiary 

that provides level annual payments 

and that would have been a permissible 

annuity distribution option. If there is 

no designated beneficiary, then section 

401(a)(9)(B)(ii) applies in accordance 

with paragraph (d)(4)(i) of this section. 

If the designated beneficiary is not an 

eligible designated beneficiary, then 

section 401(a)(9)(B)(ii) applies in 

accordance with paragraph (d)(4)(ii) of 

this section. 

(4) Application of section 

401(a)(9)(B)(ii)—(i) Application of 5- 

year rule. If the 5-year rule in section 

401(a)(9)(B)(ii) applies to the 

distribution to the payee under the 

contract (or distribution option), then no 

amount is required to be distributed to 

satisfy the applicable enumerated 

section in paragraph (b) of this section 

until the end of the calendar year that 

includes the date 5 years after the date 

of the employee’s death. For the 

calendar year that includes the date 5 

years after the employee’s death, the 

amount required to be distributed to 

satisfy the applicable enumerated 

section is the payee’s entire remaining 

interest in the annuity contract (or 

under the plan in the case of 

distributions from a defined benefit 

plan). However, see § 1.401(a)(9)–6(j) for 

rules regarding payments that are not 

permitted under section 436. 

(ii) Application of 10-year rule. If the 

employee dies before distribution of the 

employee’s entire interest, section 


jspears on DSK121TN23PROD with PROPOSALS3
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Proposed Rules 10567 

401(a)(9)(H) applies, and the designated 

beneficiary of the remaining interest is 

not an eligible designated beneficiary, 

then no amount is required to be 

distributed to satisfy the applicable 

enumerated section in paragraph (b) of 

this section until the end of the calendar 

year that includes the date 10 years after 

the date of the employee’s death. For the 

calendar year that includes the date 10 

years after the employee’s death, the 

amount required to be distributed to 

satisfy the applicable enumerated 

section is the payee’s entire remaining 

interest in the annuity contract. 

(5) Plans providing uniform required 

beginning date. For purposes of this 

section, if the plan provides a uniform 

required beginning date for purposes of 

section 401(a)(9) for all employees in 

accordance with § 1.401(a)(9)–2(b)(4), 

then the required minimum distribution 

for each calendar year for an employee 

who is not a 5-percent owner is the 

lesser of the amount determined based 

on the required beginning date as set 

forth in § 1.401(a)(9)–2(b)(1)(i), or 

(b)(2)(i)(A) (whichever applies to the 

employee, and without regard to 

whether the employee is a 5-percent 

owner) or the required beginning date 

under the plan. Thus, for example, if an 

employee born after July 1, 1949, who 

was not a 5-percent owner, participated 

in a defined contribution plan with a 

uniform required beginning date (as 

described in the preceding sentence) 

and the employee died after attaining 

age 72 (but before April 1 of the 

calendar year following the calendar 

year in which the employee retired) 

without a designated beneficiary, then 

required minimum distributions for 

calendar years after the calendar year 

that includes the employee’s date of 

death may be based on the lesser of— 

(i) The required minimum 

distribution determined by treating the 

employee as dying before the required 

beginning date (that is, the 5-year rule 

of § 1.401(a)(9)–3(c)(2)); or 

(ii) The required minimum 

distribution determined by treating the 

employee as dying on or after the 

required beginning date (annual 

distributions over the employee’s 

remaining life expectancy, as set forth in 

§ 1.401(a)(9)–5(d)). 

(e) Distribution of remaining benefit 

after deadline for required distribution. 

If there is any remaining benefit with 

respect to an employee (or IRA owner) 

after the calendar year in which the 

entire remaining benefit is required to 

be distributed, the required minimum 

distribution for each calendar year 

subsequent to that calendar year is the 

entire remaining benefit. Thus, for 

example, if the designated beneficiary of 

the employee is not an eligible 

designated beneficiary, then, pursuant 

to § 1.401(a)(9)–5(e)(2), the entire 

interest of the employee must be 

distributed no later than the end of the 

tenth calendar year following the 

calendar year of the employee’s death 

and the required minimum distribution 

for that calendar year and each 

subsequent calendar year is the 

remaining portion of the employee’s 

interest in the plan. 

(f) Excise tax for first distribution 

calendar year. If the amount not paid is 

an amount required to be paid by April 

1 of a calendar year that includes the 

employee’s required beginning date, the 

missed distribution is a required 

minimum distribution for the previous 

calendar year (that is, for the employee’s 

or the individual’s first distribution 

calendar year as determined in 

accordance with § 1.401(a)(9)– 

5(a)(2)(ii)). However, the excise tax 

under section 4974 is imposed for the 

calendar year that includes the last day 

by which the amount is required to be 

distributed (that is, the calendar year 

that includes the employee’s or 

individual’s required beginning date) 

even though the preceding calendar year 

is the calendar year for which the 

amount is required to be distributed. 

There is also a required minimum 

distribution for the calendar year that 

includes the employee’s or individual’s 

required beginning date, and that 

distribution is also required to be made 

during the calendar year that includes 

the employee’s or individual’s required 

beginning date. 

(g) Waiver of excise tax—(1) General 

rule. The tax under paragraph (a) of this 

section may be waived if the payee 

establishes to the satisfaction of the 

Commissioner that— 

(i) The failure to distribute the 

required minimum distribution 

described in this section was due to 

reasonable error; and 

(ii) Reasonable steps are being taken 

to remedy the failure. 

(2) Automatic waiver after election to 

distribute within 10 years of employee’s 

death. Unless the Commissioner 

determines otherwise, the tax under 

paragraph (a) of this section is waived 

automatically if— 

(i) The employee’s or individual’s 

death is before the employee’s or 

individual’s required beginning date; 

(ii) The payee is an individual— 

(A) Who is an eligible designated 

beneficiary (as defined in § 1.401(a)(9)– 

4(e)); 

(B) Whose required minimum 

distribution amount for a calendar year 

is determined under the life expectancy 

rule described in § 1.401(a)(9)–3(c)(4); 

and 

(C) Who did not make an affirmative 

election to have the life expectancy rule 

apply as described in § 1.401(a)(9)– 

3(c)(5)(iii); 

(iii) The payee fails to satisfy the 

minimum distribution requirement; and 

(iv) The payee elects the 10-year rule 

described in § 1.401(a)(9)–3(c)(3) by the 

end of the ninth calendar year following 

the calendar year of the employee’s 

death. 

(3) Automatic waiver for failure to 

take required minimum distribution for 

the year of death. Unless the 

Commissioner determines otherwise, 

the tax under paragraph (a) of this 

section is waived automatically if— 

(i) A distribution is required to be 

made to an individual under 

§ 1.401(a)(9)–3 or § 1.401(a)(9)–5 in a 

calendar year; 

(ii) The individual who was required 

to take the distribution described in 

paragraph (g)(3)(i) of this section died in 

that calendar year without satisfying 

that distribution requirement; and 

(iii) The beneficiary of the individual 

described in paragraph (g)(3)(ii) of this 

section satisfies that distribution 

requirement no later than the tax filing 

deadline (including extensions thereof) 

for the taxable year of that beneficiary 

that begins with or within that calendar 

year. 

(h) Applicability date. This section 

applies for taxable years beginning on or 

after January 1, 2022. For earlier taxable 

years, the rules of 26 CFR 54.4974–2 

(revised as of April 1, 2021) apply. 

§ 54.4974–2 Excise Tax on Accumulations 

in Qualified Retirement Plans [Removed] 

■ Par. 11. Remove § 54.4974–2. 

* * * * * 

Douglas W. O’Donnell, 

Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. 2022–02522 Filed 2–23–22; 8:45 am] 

BILLING CODE 4830–01–P 


jspears on DSK121TN23PROD with PROPOSALS3