Insider

The IRS has proposed regulations to permit government retirement plans to rely on a reasonable good-faith standard when applying the minimum distribution rules under section 401(a)(9).

Under the proposed rule, which implements a directive under the Pension Protection Act of 2006, government plans may offer certain annuity distribution options that are otherwise not permitted under the minimum distribution rules. For example, a government plan could provide annuity payments with a cost-of-living adjustment (COLA) tied to pay increases for the position held by an employee at retirement. In a nongovernment plan, this COLA option would violate section 401(a)(9), which generally limits COLAs to increases in standard indexes such as the consumer price index.