n-02-27.pdf

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Part III --- Administrative, Procedural and Miscellaneous

Reporting Required Minimum Distributions from IRAs

Notice 2002-27

PURPOSE

This notice provides guidance on the reports that trustees, custodians, and
issuers are required to make with respect to required minimum distributions from
individual retirement accounts and annuities (IRAs).

BACKGROUND

Section 401(a)(9)(A) of the Internal Revenue Code provides rules for required
minimum distributions from qualified plans during the life of an employee and
§ 401(a)(9)(B) provides rules for required minimum distributions after the death of an
employee. Section 408(a)(6) and (b)(3) provides that rules similar to the rules of
§ 401(a)(9) apply to IRA distributions. Under § 401(a)(9)(C), the required beginning
date for an IRA owner is April 1 of the calendar year following the calendar year in
which the owner attains age 70½.

Section 408(i) provides that the trustee of an IRA shall make reports regarding
such accounts as the Secretary may require.

Proposed regulations under §§ 401(a)(9) and 408(a)(6) and (b)(3) were
published in January 2001 (2001-11 I.R.B. 865). The proposed regulations, which
substantially simplified the rules for determining required minimum distributions,
provided that the trustee, custodian or issuer of an IRA is required to report the amount
of required minimum distributions from an IRA in accordance with IRS forms and
instructions. For purposes of this notice, the term “trustee” includes a trustee,
custodian, and an issuer of IRAs. The preamble to the proposed regulations described
a process under which the IRS would be receiving public comments and consulting with
interested parties in order to evaluate how to implement a reporting requirement that
would provide the most useful information to the IRA owners and beneficiaries while
minimizing the burden on IRA trustees.

The IRS has received a number of comments regarding the reporting
requirement in the proposed regulations and the comments have been taken into
account. Final and temporary regulations under §§ 401(a)(9) and 408(a)(6) and (b)(3)
were published in the Federal Register on April 17, 2002. These regulations are
effective January 1, 2003.

Section 1.408-8, Q&A-10, of the new regulations provides that the trustee of an
IRA is required to report information, with respect to the 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 as well as in Federal tax
forms and accompanying instructions. This notice is being issued in conjunction with
those regulations and pursuant to this delegation of authority to require reporting with
respect to required minimum distributions from IRAs.

The reporting provisions in this notice are intended to assist taxpayers in
complying with the minimum distribution requirement. However, the Treasury and the
IRS continue to have concerns about the overall level of compliance in this area and
intend to monitor the effect of the new reporting regime on compliance to determine
whether it would be appropriate to modify the regime in the future.

Although reporting of a required minimum distribution applies with respect to
each IRA, the IRA owner may take the required minimum distribution from another IRA
of the owner to the extent permitted under Q&A-9 of § 1.408-8.

REPORTING

I. Required Reporting to the IRA Owner

If a minimum distribution is required with respect to an IRA for a calendar year
and the IRA owner is alive at the beginning of the year, the trustee that held the IRA as
of December 31 of the prior year must provide a statement to the IRA owner by January
31 of the calendar year regarding the required minimum distribution in accordance with
either of the two alternatives in this section. This requirement is effective beginning with
required minimum distributions for 2003 (so that the first reports are due January 31,
2003).

Alternative one
. An IRA trustee furnishes the IRA owner with a statement of the
amount of the required minimum distribution with respect to the IRA for the calendar
year and the date by which such amount must be distributed. The amount is permitted
to be calculated assuming that the sole beneficiary of the IRA is not a spouse more
than 10 years younger than the IRA owner and that no amounts received by the IRA
after December 31 of the prior year are required to be taken into account to adjust the
value of the IRA as of December 31 of the prior year for purposes of determining the
required minimum distribution pursuant to Q&A-7 or Q&A-8 of § 1.408-8.

Alternative two
. An IRA trustee provides a statement to the IRA owner that: (1)
informs the IRA owner that a minimum distribution with respect to the IRA is required for

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the calendar year and the date by which such amount must be distributed and (2)
includes an offer to furnish the IRA owner, upon request, with a calculation of the
amount of the required minimum distribution with respect to the IRA for that calendar
year. If the IRA owner requests such a calculation, the IRA trustee must calculate the
required minimum distribution for the IRA owner and report that amount to the IRA
owner.

Under both alternatives, the statement must also inform the IRA owner that the
trustee will be reporting to the IRS, beginning with required minimum distributions for
calendar year 2004, that the IRA owner is required to receive a required minimum
distribution for the calendar year. (See section II below.) The statement can be
provided to the IRA owner in conjunction with the statement of the fair market value of
the IRA as of December 31 of the prior year that is otherwise required to be provided to
the IRA owner by January 31 of a year.

If the surviving spouse of a deceased IRA owner elects to treat an IRA for which
the spouse is the sole beneficiary as the spouse’s own IRA by redesignating the IRA as
an account in the name of the spouse as IRA owner rather than as beneficiary, the IRA
trustee reports information on the required minimum distribution to the surviving spouse
under the IRA owner rules in this section I. If the spouse is the sole beneficiary of an
IRA of a deceased owner but has not affirmatively redesignated the IRA as the
spouse’s own IRA, the IRA trustee is permitted to assume that the surviving spouse of
the deceased IRA owner has not elected to treat the IRA as the spouse’s own IRA and
continues to be treated as a beneficiary for purposes of § 401(a)(9).

II. Required Reporting to the IRS

Beginning with required minimum distributions for calendar year 2004, if a
minimum distribution is required with respect to an IRA for a calendar year, the trustee
of the IRA must indicate that a minimum distribution is required with respect to the IRA
for the calendar year (but need not indicate the amount) on Form 5498, IRA
Contribution Information, for the immediately preceding year (i.e., on a 2003 Form 5498
for a 2004 required minimum distribution) in accordance with the instructions for Form
5498.

III. No Reporting for Section 403(b) Contracts and IRAs of Deceased Owners

Section 1.403(b)-3 provides that a section 403(b) contract is treated as an
individual retirement plan for purposes of satisfying the required minimum distribution
rules. Consequently, the delegation of authority to require reporting for IRAs also
applies to section 403(b) contracts. However, no reporting is required at this time with
respect to required minimum distributions from section 403(b) contracts.

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Reporting is also not required at this time with respect to IRAs of deceased
owners. Accordingly, no reporting is required for Roth IRAs because there are no
lifetime minimum distributions required for Roth IRAs. If reporting is required in the
future for section 403(b) contracts or IRAs of deceased owners, the IRS will issue
additional guidance, which will be effective prospectively.

IV. Application for Years After 2003

This notice provides the reporting rules for required minimum distributions for
calendar year 2003. For required minimum distributions for calendar years after 2003,
these rules apply except to the extent modified in Federal tax forms and accompanying
instructions.

PAPERWORK REDUCTION ACT

The collections of information contained in this notice have been reviewed and
approved by the Office of Management and Budget in accordance with the Paperwork
Reduction Act (44 U.S.C. section 3507) under control number 1545-1779.

An agency may not conduct or sponsor, and a person is not required to respond
to, a collection of information unless the collection of information displays a valid control
number.

The collection of information in this notice is in the section titled “REPORTING.”
This information is required to inform IRA owners of their required minimum
distributions for the year. The likely respondents are (1) businesses or other for-profit
institutions and (2) not-for-profit institutions.

The estimated total annual reporting burden is 1,170,000 hours.

The estimated annual burden per respondent varies from 4 minutes to 20 hours,
depending on individual circumstances, with an estimated average of 15 hours. The
estimated number of respondents is 78,000.

The estimated annual frequency of responses is one.

Books or records relating to a collection of information must be retained as long
as their contents may become material in the administration of any internal revenue
law.

DRAFTING INFORMATION

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The principal authors of this notice are Steven Linder of the Employee Plans,
Tax Exempt and Government Entities Division and Cathy Vohs of the Office of the
Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). For
further information regarding this notice, contact the Employee Plans taxpayer
assistance telephone service between the hours of 8:00 a.m. and 6:30 p.m. Eastern
Time, Monday through Friday by calling 1-877-829-5500 (a toll-free number). Mr.
Linder can be reached at (202) 283-9888 (not a toll-free number). Ms. Vohs can be
reached at (202) 622-6090 (not a toll-free number).

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