The IRS has issued the much-anticipated final regulations on hybrid retirement plans — and has also provided regulations on the tax treatment of distributions from Roth accounts under tax-favored retirement plans, such as 401(k), 403(b) and 457 plans.
In a 111-page document, the final regulations on hybrid retirement plans, including cash balance plans, provides guidance on issues left unaddressed by the rules on hybrid plans issued in 2010.
Also included were proposed regulations (21 pages) on hybrid plans that would allow defined benefit plans not complying with the requirement that plans not provide interest credits at a rate above the market rate of return “to comply with that requirement by changing to an interest crediting rate that is permitted under the final hybrid plan regulations, without violating the anti-cutback rules of section 411(d)(6)."
A hearing has been scheduled for Jan. 9, 2015 on the proposed rules.
Roth Regulations
Separately, the IRS released proposed rules (nine pages) to the regulations on the tax treatment of distributions from Roth accounts under tax-favored retirement plans, such as 401(k), 403(b) and 457 programs. The proposed regulations would limit the applicability of the rule on allocating after-tax amounts when disbursements are made to multiple locations. The proposed rule would apply only to distributions made before Jan. 1, 2015, or a date chosen by the taxpayer that is on or after Sept. 18 (the date of the proposed regulations).
The IRS also released Notice 2014–54 (six pages), providing “rules for allocating pretax and after-tax amounts among disbursements that are made to multiple destinations from a qualified plan described in” tax code Section 401(a).” This notice also applies to disbursements from Section 403(b) plans and Section 457(b) plans.
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