Publication 575 - Pension And Annuity Income - 2002 Page 28
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34rated from service and had begun receiving pay-
of the required minimum distribution that was not distrib-
ments under the election,
uted.
For this purpose, a qualified retirement plan includes:
•
From an employee stock ownership plan for divi-
•
dends on employer securities held by the plan, or
A qualified employee plan,
•
•
From a qualified retirement plan due to an IRS levy
A qualified employee annuity plan,
of the plan.
•
An eligible section 457 deferred compensation plan,
or
Additional exceptions for nonqualified annuity con-
•
tracts. The tax does not apply to distributions that are:
A tax-sheltered annuity plan (403(b) plan) (for bene-
fits accruing after 1986).
•
From a deferred annuity contract to the extent allo-
cable to investment in the contract before August 14,
Waiver. The tax may be waived if you establish that the
1982,
shortfall in distributions was due to reasonable error and
•
From a deferred annuity contract under a qualified
that reasonable steps are being taken to remedy the
personal injury settlement,
shortfall. If you believe you qualify for this relief, you must
•
file Form 5329, pay the tax, and attach a letter of explana-
From a deferred annuity contract purchased by your
tion. If the IRS grants your request, the tax will be refunded.
employer upon termination of a qualified employee
plan or qualified employee annuity plan and held by
State insurer delinquency proceedings. You might
your employer until your separation from service, or
not receive the minimum distribution because of state
•
insurer delinquency proceedings for an insurance com-
From an immediate annuity contract (a single pre-
pany. If your payments are reduced below the minimum
mium contract providing substantially equal annuity
because of these proceedings, you should contact your
payments that start within one year from the date of
plan administrator. Under certain conditions, you will not
purchase and are paid at least annually).
have to pay the 50% excise tax.
Recapture tax for changes in distribution method
Required beginning date. Unless the rule for 5% owners
under equal payment exception. An early distribution
applies, you generally must begin to receive distributions
recapture tax may apply if, before you reach age 59
/
, the
1
2
from your qualified retirement plan by April 1 of the year
distribution method under the equal periodic payment ex-
that follows the later of:
ception changes (for reasons other than your death or
•
disability). The tax applies if the method changes from the
The calendar year in which you reach age 70
1
/
, or
2
method requiring equal payments to a method that would
•
The calendar year in which you retire.
not have qualified for the exception to the tax. The recap-
ture tax applies to the first tax year to which the change
However, your plan may require you to begin to receive
applies. The amount of tax is the amount that would have
distributions by April 1 of the year that follows the year in
been imposed had the exception not applied, plus interest
which you reach age 70
1
/
, even if you have not retired.
2
for the deferral period.
5% owners. If you are a 5% owner of the employer
The recapture tax also applies if you do not receive the
maintaining your qualified retirement plan, you must begin
payments for at least 5 years under a method that qualifies
to receive distributions from the plan by April 1 of the year
for the exception. It applies even if you modify your method
that follows the calendar year in which you reach age 70
/
.
1
2
of distribution after you reach age 59
1
/
. In that case, the
2
This rule does not apply if your retirement plan is a govern-
tax applies only to payments distributed before you reach
ment or church plan.
age 59
1
/
.
2
You are a 5% owner if, for the plan year ending in the
Report the recapture tax and interest on line 4 of Form
calendar year in which you reach age 70
1
/
, you own (or are
2
5329. Attach an explanation to the form. Do not write the
considered to own under section 318 of the Internal Reve-
explanation next to the line or enter any amount for the
nue Code) more than 5% of the outstanding stock (or more
recapture on lines 1 or 3 of the form.
than 5% of the total voting power of all stock) of the
employer, or more than 5% of the capital or profits interest
Tax on Excess Accumulation
in the employer.
Age 70
1
/
. You reach age 70
1
/
on the date that is 6
2
2
To make sure that most of your retirement benefits are
calendar months after the date of your 70th birthday. For
paid to you during your lifetime, rather than to your benefi-
example, if your 70th birthday was on June 30, 2001, you
ciaries after your death, the payments that you receive
reached age 70
1
/
on December 30, 2001. If your 70th
2
from qualified retirement plans must begin no later than
birthday was on July 1, 2001, you reached age 70
1
/
on
2
your required beginning date (defined later). The pay-
January 1, 2002.
ments each year cannot be less than the minimum re-
quired distribution.
In 2002, the IRS announced new rules that sim-
!
If the actual distributions to you in any year are less than
plify the calculation of required distributions.
the minimum required distribution for that year, you are
Plans are not required to adopt these new rules
CAUTION
subject to an additional tax. The tax equals 50% of the part
until 2003, so the following discussion reflects both the old
Page 28
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