[Federal Register Volume 87, Number 37 (Thursday, February 24, 2022)]
[Proposed Rules]
[Pages 10504-10567]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-02522]



[[Page 10503]]

Vol. 87

Thursday,

No. 37

February 24, 2022

Part III





 Department of the Treasury





-----------------------------------------------------------------------





Internal Revenue Service





-----------------------------------------------------------------------





26 CFR Parts 1 and 54





Required Minimum Distributions; Proposed Rule

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

[[Page 10504]]


-----------------------------------------------------------------------

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, Sec.  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(46 FR 36198) is withdrawn.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or withdrawn.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 70\1/2\ 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

[[Page 10505]]

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 
multi-beneficiary 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\
---------------------------------------------------------------------------

    \1\ The 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.
---------------------------------------------------------------------------

    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 70\1/
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 70\1/2\ 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\
---------------------------------------------------------------------------

    \2\ Section 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.
---------------------------------------------------------------------------

    Section 401(b)(5) of the SECURE Act provides that if an employee 
dies before the effective date of section 401(a)(9)(H)

[[Page 10506]]

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.
---------------------------------------------------------------------------

    \3\ A 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.
---------------------------------------------------------------------------

    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

[[Page 10507]]

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.
---------------------------------------------------------------------------

    \4\ Final 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.
---------------------------------------------------------------------------

    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 Sec.  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 
question-and-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 Sec.  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

[[Page 10508]]

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 Sec.  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 Sec.  1.401(a)(9)-8, Q&A-1, but is moved to 
Sec.  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 Sec.  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 70\1/2\, 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 70\1/2\ 
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 70\1/2\ on or after January 1, 2020. This 
effective date provision could be interpreted to require the employee 
to survive until age 70\1/2\ in order to have the amended definition 
apply (that is, if the employee died before attaining age 70\1/2\, then 
the amended definition would not apply with respect to distributions to 
that employee's beneficiary, even if the employee would have attained 
age 70\1/2\ 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 70\1/2\ if the employee would have attained age 70\1/2\ 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 Sec.  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 Sec.  1.401(a)(9)-3(b) and the 
rules for distributions from defined contribution plans set forth in 
proposed Sec.  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

[[Page 10509]]

must provide for the life expectancy payments rule.

D. Section 1.401(a)(9)-4--Determination of the Designated Beneficiary

    Proposed Sec.  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 long-continued 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

[[Page 10510]]

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 see-through trust. Specifically, to be a see-
through 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 Sec.  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.
---------------------------------------------------------------------------

    \5\ These proposed regulations provide for the determination of 
the trust beneficiaries that are treated as beneficiaries of the 
employee in Sec.  1.401(a)(9)-4(f). In the existing regulations, 
these provisions were in Sec.  1.401(a)(9)-5.
---------------------------------------------------------------------------

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 
see-through 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.
---------------------------------------------------------------------------

    \6\ For 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.
---------------------------------------------------------------------------

    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 see-through 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 see-through 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 see-through 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

[[Page 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 See-Through Trusts
    These proposed regulations also provide for certain beneficiaries 
of a see-through 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 
see-through 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 see-through 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

[[Page 10512]]

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 multi-beneficiary 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 means-
tested government benefits and still satisfy the requirements under the 
Code to be a type II applicable multi-beneficiary 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 see-through 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

[[Page 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 Sec.  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 Sec.  
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 Sec.  
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 Sec.  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)

[[Page 10514]]

(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 non-spouse 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

[[Page 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 Sec.  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 70\1/2\
    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 70\1/2\, then the employee's accrued benefit 
must be actuarially increased to take into account the period after age 
70\1/2\ 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 70\1/2\.
    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

[[Page 10516]]

in which the employee reaches age 70\1/2\.
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 Sec.  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.
---------------------------------------------------------------------------

    \7\ Notice 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.
---------------------------------------------------------------------------

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 Sec.  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 
Sec.  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

[[Page 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 Sec.  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 Sec.  
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 Sec.  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 Sec.  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 Sec.  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 multi-
beneficiary 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 Sec.  1.401(a)(9)-9 to conform the terminology in that 
section to the new terminology used in proposed Sec.  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 
Sec.  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

[[Page 10518]]

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 Sec.  1.402(c)-3 to Sec.  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).

[[Page 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 Sec.  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 70\1/2\ in the current 
regulations to the required beginning date as determined under Sec.  
1.401(a)(9)-2(b).
    These proposed regulations also amend Sec.  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 Sec.  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 Sec.  1.408-8. Thus, for example, under 
Sec.  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)

[[Page 10520]]

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 Sec.  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 70\1/2\ in the current regulations to the required beginning date 
as determined under Sec.  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 
70\1/2\ 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 Sec.  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

[[Page 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 Sec.  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 59\1/2\ 
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 Sec.  1.457-6(d) 
that describes section 401(a)(9), because the sentence refers to age 
70\1/2\, 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 Sec.  54.4974-2 
(which is renumbered as Sec.  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 Sec. Sec.  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 Sec.  1.402(c)-2 is proposed to apply for 
distributions on or after January 1, 2022. Amended Sec.  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 Sec.  
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 Sec.  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 Sec.  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 Sec.  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

[[Page 10522]]

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

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

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

0
Par. 2. Revise sections 1.401(a)(9)-0 through 1.401(a)(9)-8 to read as 
follows:


Sec.  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:

Sec.  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.

Sec.  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.

Sec.  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.

Sec.  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.

[[Page 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.

Sec.  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.

Sec.  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.

Sec.  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.

Sec.  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.

Sec.  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.


Sec.  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 Sec. Sec.  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 Sec.  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 Sec.  1.408-8 for the minimum 
distribution rules applicable to IRAs and Sec.  1.408A-6 for the 
minimum distribution rules applicable to Roth IRAs under section 408A. 
Under section

[[Page 10524]]

457(d)(2), eligible deferred compensation plans described in section 
457(b) for employees of tax-exempt organizations or employees of State 
and local governments are subject to required minimum distribution 
rules. See Sec.  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 Sec.  
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 Sec. Sec.  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 Sec.  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.

[[Page 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 non-disabled, 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 Sec.  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 Sec.  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 
Sec. Sec.  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 Sec.  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 Sec.  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 Sec.  1.401(a)(9)-
3(c)(5)(iii).
    (d) Regulatory effective date--This section and Sec. Sec.  
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.


Sec.  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 
Sec.  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 Sec.  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 Sec.  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 Sec.  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

[[Page 10526]]

section and Sec.  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 Sec.  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 profit-sharing 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 Sec.  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 Sec.  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 Sec.  1.401(a)(9)-5. In the case 
of annuity payments from a defined benefit plan or under an annuity 
contract, see Sec.  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 70\1/2\; 
and
    (B) The calendar year in which the employee retires from employment 
with the employer maintaining the plan.
    (ii) Attainment of age 70\1/2\. An employee attains age 70\1/2\ 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 70\1/
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 70\1/2\ 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 Sec.  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.


Sec.  1.401(a)(9)-3   Death before required beginning date.

    (a) In general. Except as otherwise provided in Sec. Sec.  
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 Sec.  1.401(a)(9)-
6(j) (relating to defined benefit plans subject to

[[Page 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 Sec.  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 Sec.  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 Sec.  
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 Sec.  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 Sec.  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 Sec.  
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

[[Page 10528]]

    (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 70\1/2\ 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 Sec.  1.401(a)(9)-6(l) for an exception to this rule 
in the case of an annuity that commences early.


Sec.  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 Sec. Sec.  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 Sec.  
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 Sec.  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 one-third 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.

[[Page 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 Sec.  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 Sec.  
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 Sec.  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 long-continued 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 long-continued 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

[[Page 10530]]

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 Sec.  
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 Sec.  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 Sec.  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 Sec.  1.401(a)(9)-5(e)(4).
    (f) Special rules for trusts--(1) Look-through 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

[[Page 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 Sec.  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 Sec.  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 Sec.  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 Sec.  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

[[Page 10532]]

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 
Sec.  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 Sec.  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 Sec.  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 Sec.  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 
Sec.  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 Sec.  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

[[Page 10533]]

401(a)(9)(B)(iii). Note, however, that because Sec.  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 Sec.  
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 Sec.  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 multi-beneficiary 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 multi-beneficiary 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 Sec.  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 Sec.  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 
Sec.  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 Sec.  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

[[Page 10534]]

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.


Sec.  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 Sec.  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 Sec.  1.401(a)(9)-3(d)). 
See Sec.  1.401(a)(9)-3(c)(5) to determine whether the life expectancy 
rule in Sec.  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 
Sec.  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 Sec.  
1.401(a)(9)-6(d) with the employee's entire individual account provided 
that the terms of the annuity satisfy Sec.  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 Sec.  1.401(a)(9)-
3(c)(4) or, if applicable, Sec.  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 Sec.  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 Sec.  
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

[[Page 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 Sec.  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), Sec.  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, Sec.  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 Sec.  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 Sec.  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 Sec.  
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 Sec.  
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 Sec.  
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 
Sec.  1.401(a)(9)-2(a)(3)) and the life expectancy rule described in 
Sec.  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 Sec.  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

[[Page 10536]]

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 Sec.  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 
Sec.  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 Sec.  
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 Sec.  
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 Sec.  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 Sec.  1.401(a)(9)-4(g)(3)(i), then only the trust beneficiaries 
described in Sec.  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 Sec.  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 Sec.  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 Sec.  
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 Sec.  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 Sec.  
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 Sec.  
1.402(c)-2(c)(3) (relating to amounts that are not treated as eligible 
rollover distributions).


Sec.  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

[[Page 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 Sec.  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 Sec.  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 Sec.  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 Sec.  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

[[Page 10538]]

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
------------------------------------------------------------------------
                                                             Applicable
           Employee/beneficiary  age difference              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 Sec.  
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 Sec.  
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 Sec.  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 Sec.  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 Sec.  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

[[Page 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 70\1/2\, 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 70\1/2\0 (or January 1, 1997, if the 
employee attained 70\1/2\ 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 70\1/2\. See Sec.  
1.401(a)(9)-2(b)(2)(ii) for the determination of the calendar year in 
which an employee attains age 70\1/2\.
    (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 Sec.  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)).

[[Page 10540]]

    (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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  
1.401(a)(9)-5 rather than this section. See Sec.  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, Sec.  1.401(a)(9)-5(c)(4) for rules 
relating to QLACs (as defined in paragraph (q) of this section), and 
Sec.  1.401(a)(9)-5(a)(5)(iii) for rules

[[Page 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 Sec.  
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 Sec.  
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 Sec.  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)
----------------------------------------------------------------------------------------------------------------
                                                    End-of-year                                     End-of-year
                                        Death        notional         Average      Withdrawal at     notional
                Year                   benefit    account before     notional       end of year    account after
                                     during year    withdrawal        account                       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.
\3\ Average 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.


[[Page 10542]]


                                  Table 3--Applicable to Paragraph (m)(4)(i)(B)
----------------------------------------------------------------------------------------------------------------
                                                                                                    Discounted
                                                   Survivorship      Interest     Mortality rate    additional
                      Year                          to start of    discount  to     during year      benefits
                                                       year         end of 2028                     within year
----------------------------------------------------------------------------------------------------------------
2028............................................  ..............  ..............  ..............  ..............
2029............................................         1.00000          .97590       \5\.03321          12,933
2030............................................          .96679       \6\.92943          .03739       \7\12,398
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
----------------------------------------------------------------------------------------------------------------
\5\ One-quarter age 78 rate plus three-quarters age 79 rate.
\6\ Five percent discounted 18 months (1.05(-\1.5\)).
\7\ Blended 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.
\8\ Survivorship 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 Sec.  
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)
----------------------------------------------------------------------------------------------------------------
                                                    End-of-year                                     End-of-year
                                   Death benefit     notional         Average      Withdrawal at     notional
              Year                  during year   account before     notional      end  of year    account after
                                                    withdrawal        account                       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)
----------------------------------------------------------------------------------------------------------------
                                                                                                    Discounted
                                                   Survivorship      Interest     Mortality rate    additional
                      Year                          to start of     discount to     during year      benefits
                                                       year         end of 2028                     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 Sec.  1.401(a)(9)-5, the entire 
interest under Contract S must include the actuarial present value of 
the additional death benefit.

[[Page 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 Sec.  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 non-retired 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 pre-modification 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 term-certain annuity the 
opportunity to modify their payment period at any time and treats the 
modifications as a new

[[Page 10544]]

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 pre-modification 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 cost-of-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

[[Page 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 
Sec.  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 Sec.  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 Sec.  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

[[Page 10546]]

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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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

[[Page 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 Sec.  
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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 
Sec.  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 Sec.  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.

[[Page 10548]]

    (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 
Sec.  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 
pre-annuity 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)
------------------------------------------------------------------------
                                                            Applicable
      Adjusted employee/ beneficiary age difference         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 non-spousal 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

[[Page 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 non-spousal 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 Sec.  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 Sec.  
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 non-QLAC 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 Sec.  
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 Sec.  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.

[[Page 10550]]

    (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 Sec.  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 Sec.  
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 Sec.  
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-of-living 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.


Sec.  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 Sec.  
1.402(c)-2(f) for a distribution to an employee and Sec.  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 Sec.  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 Sec.  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 Sec.  
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.

[[Page 10551]]

Sec.  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 Sec.  
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 Sec.  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 Sec.  
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 Sec.  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 post-death 
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 Sec.  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 
Sec.  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 Sec.  1.401(a)(9)-5 for 
each distribution calendar year using an applicable denominator 
determined under Sec.  1.401(a)(9)-5(c) (determined by treating the 
spousal alternate payee as the employee's spouse).

[[Page 10552]]

    (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 Sec.  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 Sec.  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 Sec.  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 Sec.  1.401(a)(9)-5(c) or Sec.  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 Sec.  1.401(a)(9)-5(d) or 
Sec.  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 Sec.  1.401(a)(9)-5(g) or Sec.  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 Sec.  1.401(a)(9)-5(g) or Sec.  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 Sec.  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

[[Page 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 Sec.  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 catch-up 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).
0
Par. 3.Section 1.401(a)(9)-9 is amended as follows:
0
1. In the title, remove the phrase ``distribution period'' and add in 
its place the phrase ``uniform lifetime''.
0
2. In paragraph (a), remove the phrase ``applicable distribution 
period'' and add in its place the phrase ``uniform lifetime''.
0
3. In paragraph (c), remove the phrase ``distribution period'' and add 
in its place the phrase ``applicable denominator''.
0
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''.
0
5. In paragraph (f)(2)(i), remove the phrase ``distribution period that 
applies'' and add in its place the phrase ``applicable denominator''.
0
6. In paragraph (f)(2)(i), remove the phrase ``applicable distribution 
period'' and add in its place the phrase ``applicable denominator''.
0
7. In the heading of paragraph (f)(2)(ii), remove the phrase 
``distribution period'' and add in its place the word ``denominator''.
0
8. In the heading of paragraph (f)(2)(ii)(A), remove the phrase 
``Distribution period'' and add in its place the phrase ``Applicable 
denominator''.
0
9. In paragraph (f)(2)(ii)(A), remove the phrase ``distribution period 
that applies'' and add in its place the phrase ``applicable 
denominator''.
0
10. In paragraph (f)(2)(ii)(A), remove the phrase ``resulting 
distribution period'' and add in its place the phrase ``resulting 
applicable denominator''.
0
11. In paragraph (f)(2)(ii)(A), remove the last sentence.
0
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''.
0
13. In paragraph (f)(2)(ii)(B), remove the phrase ``period applicable'' 
and add in its place the phrase ``life expectancy''.
0
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)''.
0
15. In paragraph (f)(2)(ii)(B), remove the phrase ``applicable 
distribution period'' and add in its place the phrase ``applicable 
denominator''.
0
16. In paragraph (f)(2)(ii)(B), remove the last sentence.
0
Par. 4. Revise Sec.  1.402(c)-2 to read as follows:


Sec.  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

[[Page 10554]]

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 Sec.  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 Sec.  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 Sec.  
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 Sec.  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 Sec.  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 Sec.  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-to-trustee 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

[[Page 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 Sec.  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 
Sec.  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 Sec.  1.401(k)-
2(b)(2) and excess aggregate contributions described in Sec.  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 Sec.  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 Sec.  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

[[Page 10556]]

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 Sec.  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 Sec.  1.401(a)(9)-
5(a)(2)(ii)) is not treated as

[[Page 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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec. Sec.  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 Sec.  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.

[[Page 10558]]

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 Sec.  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 
Sec.  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

[[Page 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 Sec.  1.401(a)(31)-1, Q&A-17 and Sec.  
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 Sec.  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 Sec.  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 Sec.  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 Sec.  
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 Sec.  
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

[[Page 10560]]

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 
Sec.  1.401(a)(9)-3(c)(4) (or, in the case of a defined benefit plan, 
the annuity payment rule described in Sec.  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 Sec.  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 Sec.  1.401(a)(9)-5(d) and (e) (or, 
in the case of a defined benefit plan, Sec.  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 Sec.  1.401(a)(9)-5(c) (or, in the case 
of a defined benefit plan, Sec.  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 
Sec.  1.401(a)(9)-5(d) and (e) (or, in the case of a defined benefit 
plan, Sec.  1.401(a)(9)-6).
    (ii) Exception allowing beneficiary to change distribution method. 
If the 5-year rule or 10-year rule described in Sec.  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 Sec.  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 Sec.  1.401(a)(9)-3(c)(4) (or, in the case of a defined 
benefit plan, the annuity payment rule described in Sec.  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 Sec.  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 Sec.  1.401(a)(9)-5, using the applicable 
denominator under Sec.  1.401(a)(9)-5(d) (or, in the case of a defined 
benefit plan, calculated under Sec.  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

[[Page 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 ten-year 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 Sec.  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 Sec.  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).


Sec.  1.402(c)-3.   [Removed]

0
Par. 5.Remove Section 1.402(c)-3.
0
Par. 6.Amend Sec.  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 Sec.  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 Sec.  1.401(a)(9)-
2(b) (rather than Sec.  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 Sec.  1.402(c)-2(c)(3) (rather than the amounts 
described in Sec.  1.408-8(g)(2)).
    (iii) Qualifying longevity annuity contracts. The rules in Sec.  
1.401(a)(9)-6(q)(2)(i) (relating to limitations on premiums for a 
qualifying longevity annuity contract (QLAC), as defined in Sec.  
1.401(a)(9)-6(q)(1)) and Sec.  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 Sec.  1.408-8(h)(2) and (3)).
    (4) Surviving spouse rule does not apply. The special rule in Sec.  
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 Sec.  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 Sec.  601.601(d) of this 
chapter). See also Sec.  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) Non-applicability 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

[[Page 10562]]

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 
Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  
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.
* * * * *
0
Par. 7.Revise Sec.  1.408-8 to read as follows:


Sec.  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 
Sec. Sec.  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 Sec.  1.401(a)(9)-3(c), and the rules of Sec.  
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 Sec.  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 Sec. Sec.  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 Sec.  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 70\1/2\ 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 
70\1/2\ in

[[Page 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 Sec.  
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 Sec. Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  
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 Sec.  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 Sec.  1.401(a)(9)-3(c)(4) or the annuity 
payment rule described in Sec.  1.401(a)(9)-3(b)(3) apply to any IRA to 
which any portion of that distribution is rolled over. However, see 
Sec.  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

[[Page 10564]]

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 Sec.  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 Sec.  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 Sec.  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 
Sec.  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 Sec.  601.601(d) of this chapter.
    (h) Qualifying longevity annuity contracts--(1) General rule. The 
special rule in Sec.  1.401(a)(9)-5(b)(4) for a QLAC, defined in Sec.  
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 Sec.  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 Sec.  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

[[Page 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 Sec.  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 Sec.  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.
0
Par. 8. Amend Sec.  1.457-6 by revising paragraph (d) to remove the 
last sentence.

PART 54--PENSION EXCISE TAXES

0
Par. 9. The authority citation for part 54 continues to read in part as 
follows:

    Authority:  26 U.S.C. 7805.

0
Par. 10. Revise Sec.  54.4974-1 to read as follows:


Sec.  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 Sec.  
1.401(a)(9)-5(a)(5) and Sec.  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 Sec.  1.401(a)(9)-5 as 
provided in the following (whichever is applicable)--
    (i) Section 401(a)(9), Sec. Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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--

[[Page 10566]]

    (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 Sec.  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 Sec.  
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 Sec.  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 Sec.  
1.401(a)(9)-6(b)(2) (taking into account the rules of Sec.  
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 
Sec.  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

[[Page 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 
Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  
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 Sec.  
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 Sec.  
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 Sec.  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 Sec.  
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 
Sec.  1.401(a)(9)-3 or Sec.  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.


Sec.  54.4974-2   Excise Tax on Accumulations in Qualified Retirement 
Plans [Removed]

0
Par. 11. Remove Sec.  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