The IRS on March 6 announced that it no longer intends to amend the required minimum distribution (RMD) regulations to address the practice of offering retirees and beneficiaries who are currently receiving annuity payments under a defined benefit plan a temporary option to elect a lump-sum payment in lieu of future annuity payments. It made the announcement in Notice 2019-18.
The regulations in question were issued under Internal Revenue Code Section 409(a)(9) and were described in Notice 2015-49. That notice said that the Treasury Department and the IRS intended to propose amendments to the RMD regulations to address the use of lump-sum payments to replace ongoing annuity payments under a qualified defined benefit plan. Notice 2019-18 supersedes Notice 2015-49.
The IRS says in Notice 2019-18 that until further guidance is issued, it will not assert that a plan amendment providing for a retiree lump-sum window program causes the plan to violate Section 401(a)(9), but will continue to evaluate whether the plan, as amended, satisfies the requirements of Internal Revenue Code Sections 401(a)(4), 411, 415, 417, 436, and other sections of the Code.
The IRS also says that it will not issue private letter rulings concerning retiree lump-sum windows.
Notice 2015-49 provided that the IRS would not express an opinion in private letter rulings or determination letters as to the federal tax consequences of a retiree lump-sum window. Now, under Notice 2019-18, if a taxpayer is eligible to apply for and receive a determination letter, the IRS will no longer include a caveat expressing no opinion regarding the tax consequences of such a window in the letter.
The notice adds that the Treasury Department and the IRS will continue to study the issue of retiree lump-sum windows.
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