Significance of November 30th in New RMD Waiver Rules

SunGard Relius

In Notice 2009-82, the IRS provides transition relief and other guidance relating to the WRERA waiver of required minimum distributions under Code §401(a)(9). … November 30, 2009 figures prominently in this relief, however, there is substantial confusion about the significance of that date. This Technical Update will discuss what distribution recipients and retirement plan sponsors must do by that date.
Rollovers
Notice 2009-82 recognizes that some recipients of 2009 retirement plan or IRA distributions might have been confused about whether 2009 RMDs (distributions which would have been RMDs if Congress hadn’t passed WRERA) were eligible for rollover. The Notice also provides transition rules which allow plan participants to roll over certain distributions (extended 2009 RMDs) which would otherwise be ineligible for rollover.
The Notice gives recipients of 2009 RMDs (whether distributed from a plan or an IRA) until November 30, 2009 to roll over the distribution, even though the normal 60-day rollover period may have expired. It provides a similar extension for recipients of extended 2009 RMDs from retirement plans. This extension only affects distributions received prior to October 1, 2009. Distributions after September 30 continue to have their normal 60-day rollover period (which will expire on or after November 30).
Plan amendments
WRERA’s RMD relief and Notice 2009-82 force plan sponsors to address several issues, including:

1. Will the plan make 2009 distributions which would be 2009 RMDs or extended 2009 RMDs?
2. Will the plan give participants the option to take or not take such a distribution? If so, what will be the default if the participant does not select?
3. Will the plan cooperate in direct rollovers involved 2009 RMDs or extended 2009 RMDs?

In most cases, the employer’s decision will require a plan amendment. (A future Technical Update will discuss the specifics of those amendments.) Plan sponsors must adopt the amendment no later than the last day of the 2011 plan year (2012 for governmental plans). …
Recognizing this difficulty, the IRS provided transition relief. The IRS will not treat a plan as failing to comply with its terms, during the period from January 1, 2009 to November 30, 2009, with regard to those three questions. …
What does this mean for the future? It means that although the employer has until 2011 to adopt its RMD amendment (unless the plan terminates before then), beginning December 1, 2009 the plan must operate in conformance with the amendment it ultimate adopts. In other words, now is the time for decision and implementation. Documentation can wait.
For most participants, this decision will affect distributions of 2009 RMDs and extended 2009 RMDs distributed during December, 2009. For participants with an April 1, 2010 required beginning date (such as participants turning 70½ during 2009), this decision will affect distributions from December 1, 2009 to April 1, 2010.