July 1997 Bulletin, "IRS Proposes Regulation on Mandatory Age 70½ Distributions that Could Ease ERISA Plan Administration "
On July 2, 1997, the Internal Revenue Service proposed a regulation that would allow tax-qualified retirement and deferred compensation plans - pension and annuity funds, profit sharing and Section 401(k) plans, ESOPs and Section 403(b) tax sheltered annuities - to delete provisions requiring the payment of benefits to participants who continue working after age 70½. As a result, plan sponsors that want to do so will be able to tell older employees that they cannot receive their pension or profit sharing plan benefits until they retire. However, under the IRS proposal, working participants who reach age 70½ before 1999 must be given the chance to start receiving benefits by the old mandatory distribution deadline, even if the plan changes that rule for the future. This Bulletin discusses the background and events leading up to this proposed regulation and briefly outlines features of the proposal.