IRS provides guidance on failure to make required minimum distributions from Section 403(b) plans

Tax Hot Topics newsletter The IRS Tax-Exempt and Government Entities division has issued a memorandum (TE/GE-04-0218-0011) directing its employee plan examiners to not challenge Section 403(b) plans that fail to make required minimum distributions (RMDs) in cases where the plan is unable to locate a terminated plan participant.

Under Treas. Reg. Sec. 1.403(b)-6(e), distributions from Section 403(b) plans must be made after a plan participant reaches the age of 70 ½ or, for participants who are not 5% owners of the plan sponsor, upon retirement.

In cases where plans are unable to make distributions to a terminated participant because of the inability to locate the individual, employee plan examiners are directed by the memorandum not to challenge a Section 403(b) plan for RMD violations if the plan has taken all of the following steps:

  • Searched for alternative contact information in the records of the plan and any related plans, the plan sponsor’s records, and public records or directories
  • Utilized any of the following search methods: commercial locator service, credit reporting agency, or a proprietary internet search tool for locating individuals
  • Attempted contact through United States Postal Service certified mail to the individual’s last known mailing address and through other appropriate means for any address or contact information, including email addresses and telephone numbers

Contact Eddie Adkins
Partner, Washington National Tax Office
T +1 202 521 1565

Jeffrey Martin
Partner, Washington National Tax Office
T +1 202 521 1515

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