New Regs A Boon To Retirees, Beneficiaries

(RIVERWOODS, IL., January 18, 2001) – Figuring how much to take out of an IRA or 401(k) will be simpler and surer under regulations recently proposed by the IRS, according to CCH INCORPORATED (CCH), a leading provider of pension, tax and human resources law information. The new proposed regulations let retirees preserve more of their retirement savings in their tax-free accounts for a longer time by reducing the amount of "required minimum distributions." At the same time, the regulations eliminate many potential traps for retirees who faced a puzzling array of distribution and beneficiary choices under prior regulations in force since 1987.

The regulations, which are still subject to public comment and possible revision, are not expected to become "final" until January 1, 2002. However, taxpayers can make use of the new rules beginning immediately, and will not suffer if the final version of the regulations is more restrictive than the ones just issued, according to Nicholas Kaster, JD, CCH senior pension law analyst.

"People should familiarize themselves with the new rules before they make any decision regarding a distribution in 2001," Kaster said.

Simpler Rules For Distributions

Distributions from IRAs and 401(k)s must begin when a retiree reaches age 70 . Under previous regulations, retirees had to choose between several different methods for computing the required minimum amount of the distribution and also had to name one or more beneficiaries at that time. The choices were confusing and it was easy for a retiree to get "locked in" to a method or beneficiary choice that would be disadvantageous in the long run.

Under the new regulations, for each yearly distribution, retirees, in most cases, simply divide the account balance at the end of the previous year by a number from a life expectancy table.

Generally, the new table will produce lower required distributions, and therefore, a greater ability to preserve the account tax-free, than was possible under the old regulations," Kaster said.

The distribution table, which was issued as part of the proposed regulations, is included at the end of this release.

More Flexibility With Beneficiary Designations

New rules for naming beneficiaries don’t require that they be designated irrevocably when distributions begin. Instead, beneficiaries can be determined as late as the end of the year following the account holder’s death. What’s more, in many cases beneficiaries will be able to stretch distributions out over a longer period than under the old rules.

"Allowing for a change of beneficiaries – even after the account holder’s death – will allow families to make the maximum use of the IRA," Kaster noted.

Dissatisfaction With Prior Regulations

The proposed regulations, issued January 12, also address questions such as naming a trust as a beneficiary and payments to a former spouse under a qualified domestic relations order.

They supersede a set of regulations issued more than 13 years ago. That earlier set never became "final," but it has been the only guidance available for account holders and trustees. Dissatisfaction with many aspects of the regulations was widespread.

"Many people have hoped that the IRS would issue something more workable than the original 1987 regulations for a long time. Congress even wrote that wish into tax legislation that nearly became law last year," Kaster observed. "It seems that with these regulations the IRS has addressed many of the issues that have concerned account holders and the benefits community for many years."


CCH INCORPORATED, headquartered in Riverwoods, Ill., was founded in 1913 and has served four generations of business professionals and their clients. The company produces more than 700 electronic and print products for the tax, legal, securities, insurance, human resources, health care and small business markets. CCH is a wholly owned subsidiary of Wolters Kluwer North America. The CCH web site can be accessed at The CCH Human Resources group web site can be accessed at

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Table for determining distribution period

General rule. The following table is used for determining the distribution period for lifetime distributions to an employee.

Age of the employee Distribution period
70 26.2
71 25.3
72 24.4
73 23.5
74 22.7
75 21.8
76 20.9
77 20.1
78 19.2
79 18.4
80 17.6
81 16.8
82 16.0
83 15.3
84 14.5
85 13.8
86 13.1
87 12.4
88 11.8
89 11.1
90 10.5
91 9.9
92 9.4
93 8.8
94 8.3
95 7.8
96 7.3
97 6.9
98 6.5
99 6.1
100 5.7
101 5.3
102 5.0
103 4.7
104 4.4
105 4.1
106 3.8
107 3.6
108 3.3
109 3.1
110 2.8
111 2.6
112 2.4
113 2.2
114 2.0
115 and older 1.8