n-03-3.pdf

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Part III. Administrative, Procedural, and Miscellaneous

Reporting Required Minimum Distributions From IRAs

Notice 2003-3

PURPOSE

This notice clarifies Notice 2002-27, 2002-18 I.R.B. 814, which provides guidance
on the reports that trustees are required to make regarding minimum distributions from
individual retirement accounts and annuities ("IRAs"). Specifically, this notice provides
that a trustee can satisfy the requirement to provide statements regarding required
minimum distributions to the owners of the IRAs for which it is the trustee by using one
of the two alternatives provided in Notice 2002-27 for some IRA owners and the other
alternative for other IRA owners. Further, this notice provides guidance on how these
statements can be transmitted electronically.

BACKGROUND AND GENERAL INFORMATION

Section 408(i) of the Internal Revenue Code provides that the trustee of an IRA
shall make such reports regarding the IRA to the Secretary and to the IRA owner as the
Secretary may require. Form 5498, IRA Contribution Information, is a form used to
satisfy part of this reporting requirement.

Section 1.408-8, A-10, of the Income Tax Regulations provides that the trustee of
an IRA must report information regarding required minimum distributions ("RMDs") from
that IRA in accordance with rules prescribed by the Commissioner. Pursuant to this
delegation of authority, the Service issued Notice 2002-27. Notice 2002-27 provides
that, if a minimum distribution is required with respect to an IRA for a calendar year after
2002, 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 RMD in accordance with either of two
alternatives. Under Alternative one, the trustee must furnish the IRA owner a statement
indicating the RMD amount for the IRA and the date by which such amount must be
distributed. Under Alternative two, the trustee must furnish the IRA owner a statement
showing that an RMD is required for the calendar year and the date by which the RMD
must be distributed, and including an offer to calculate, upon request, the amount of the
RMD. The statement required under either alternative must be provided by January 31
of each calendar year for which an RMD is required (thus, the first statement must be
provided to an IRA owner by January 31 of the calendar year he or she attains age
70½).

Notice 2003-2, 2003-2 I.R.B. (January 13, 2003), provides that until further
notice, notwithstanding A-12 of § 1.401(a)(9)-6T, in the case of an annuity contract
under an IRA from which annuity payments have not commenced on an irrevocable

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basis (except for acceleration), the IRA trustee may determine the entire interest under
the annuity contract as the dollar amount credited to the employee or beneficiary under
the annuity contract without regard to the actuarial value of any other benefits (such as
minimum survivor benefits) that will be provided under the contract.

Any term used in this notice (such as "trustee") that is also used in Notice 2002-
27 has the meaning given such term in Notice 2002-27.

REQUIRED REPORTING TO THE IRA OWNER

Permitted inconsistent use of alternatives. Notice 2002-27 is clarified to provide
that a trustee is permitted to satisfy the requirement in Notice 2002-27 that it provide
statements regarding the required minimum distributions to the owners of the IRAs for
which it is the trustee by providing statements that satisfy Alternative one to some IRA
owners and statements that satisfy Alternative two to the rest of the IRA owners.

Permitted electronic furnishing of statements. Pursuant to this notice, a trustee is
permitted to transmit electronically the statements that it is required, under Notice 2002-
27, to provide to IRA owners regarding required minimum distributions if the following
requirements are satisfied. For 2003, the electronic transmission must comply with a
reasonable and good-faith interpretation of applicable law. For calendar years after
2003, the trustee is permitted to transmit the statements electronically only if the
procedures that apply to the electronic transmission of Forms W-2, Wage and Tax
Statement are satisfied, including the consent requirement described in regulations
under Code § 6051. Use of these procedures is a reasonable, good-faith interpretation
of applicable law for 2003.

EFFECT ON OTHER DOCUMENTS

Notice 2002-27 is clarified.

DRAFTING INFORMATION

The principal author of this notice is Roger Kuehnle of the Employee Plans, Tax
Exempt and Government Entities Division. For further information regarding this notice,
please contact Employee Plans’ taxpayer assistance telephone service at 1-877-829-
5500 (a toll-free number), between the hours of 8:00 a.m. and 6:30 p.m. Eastern Time,
Monday through Friday. Mr. Kuehnle can be reached at 1-202-283-9888 (not a toll-free
number).