On April 17th of this year, final regulations were published for required minimum distributions from retirement plans. These regulations apply to all stock bonus plans, pension plans, profit sharing plans, annuity contracts, custodial accounts, IRAs, Roth IRAs and certain deferred compensation arrangements, and apply to required minimum distributions for calendar years beginning on or after January 1, 2003. However, the regulations indicate that taxpayers may rely on these new regulations to determine required minimum distributions for the 2002 calendar year.
Under the previous regulations, qualified plan owners needed to make an election on whether or not to recalculate their life expectancy, and also needed to name a beneficiary on or before their required beginning date for distributions. Electing to recalculate your life expectancy alters your required minimum distribution from year to year because your life expectancy factor (as determined by IRS Regulations) changes on a yearly basis.
Under the new law, there is no need to determine whether or not you should recalculate your life expectancy. To determine your required minimum distribution, you simply need to find your life expectancy factor based on a chart provided by the Internal Revenue Service (the Uniform Lifetime Table), and divide your life expectancy factor by your account balance as of the end of the prior calendar year. Typically, the new rules result in smaller required minimum distributions.
Additionally, you are no longer required to name your beneficiary on or before your required beginning date. Under the new rules, a designated beneficiary must be named by September 30th of the year following the year of death.
— Walter Reed