Minimum Distribution Requirements Mailing to Participants
August 15, 2008
This month, plan participants who, according to our records, are 70½ years of age or older will be receiving a letter describing their potential need to take a distribution under the minimum distribution requirements.
A plan must conform to the minimum distribution rules to meet the Internal Revenue Code requirements. Minimum distributions generally must begin by April 1 of the year following the calendar year the individual turns age 70½ or terminates employment, whichever is later. (However, any contributions or earnings credited to 403(b) retirement plans before 1987 are excluded from the accumulation subject to these federal rules until the year in which the participant reaches age 75.)
It is important that minimum distributions be taken on those accumulations that are subject to the rules because, under Section 401(a)(9) of the Code, an entire plan could be disqualified if there is a pattern or regular practice of participants failing to meet the rules. At the very least, individuals who fail to meet the annual requirements could be subject to a penalty equal to 50 percent of the amount that should have been distributed.
You should have procedures in place to ensure compliance with the minimum distribution rules. To help you with this responsibility, TIAA-CREF sends a notification to participants as well as to beneficiaries and/or survivors who must meet the requirements. A sample of the letters being mailed to participants is available for your review (PDF).
Annuity products are issued by TIAA (Teachers Insurance and Annuity Association), New York, NY