Rules on distributions from qualified plans are supplemented

Article Abstract:

There are some supplements to the rules on distributions from qualified employee benefits plans. The new guidance is provided in question and answer format in Notice 89-25, IRB 1989-12, 68. The supplements provide that: net unrealized appreciation in employees' securities from their employers are excluded from employees' incomes; distributions to nonspouse alternate payees are included in plan participants' gross income instead of payees' income; and life insurance policies received as qualified plan distributions are valued of of their cash surrender value. Other topics covered in the supplements include: IRA distributions and nondeductible contributions; subsequent distributions of remainder balances; and automatic change in valuation date approvals.

Analysis, Tax accounting

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Loss of IRA deductions makes 401(K) plans more attractive despite new limits

Article Abstract:

Under the Tax Reform Act of 1986, the deferral available on 401(K) plans will be limited, but because of the loss of IRA (individual retirement account) reductions, 401(K) plans will become more important as a means of deferring compensation and taxation thereof. For plan years beginning after 1986, the maximum salary reduction contribution for an individual will be $7,000 per calendar year; salary-reduction contributions for highly compensated individuals have been reduced; a new definition of highly compensated employees has been added; and early distribution restrictions have been liberalized.

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Plans for tax exempts have added burdens and choices

Article Abstract:

Tax-exempt organizations, such as church-related institutions offering medical and educational services, are required to meet coverage and nondiscrimination rules when designing retirement plans. The most common of these retirement programs are: Section 403 (b) tax-sheltered plans and Section 401 (a) qualified pension and profit-sharing plans. The regulations on minimum coverage and nondiscrimination standards are aimed at ensuring that such plans do not disproportionately favor highly compensated employees.

Laws, regulations and rules, Qualified benefit plans, Retirement income, Tax exemption, Tax exemptions, Annuities

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