All disbursements from a retirement plan scheduled to be made at the same time are treated as a single distribution even if they are sent to multiple destinations. That new rule becomes mandatory as 2015 dawns, the IRS reminded taxpayers in the Dec. 23 issue of its Employee Plans News e-newsletter.
When the IRS announced the new rule in Notice 2014-54 on Sept. 18, it said that it could be applied immediately on an optional basis. But that will change on Jan. 1, 2015, when the rule becomes mandatory.
Under the notice, taxpayers with pretax and after-tax amounts in their plan can transfer, through direct rollovers, the pretax portion of the distributions from qualified plans under Code Section 401(a) (such as profit-sharing and 401(k) plans), 403(b) plans and 457(b) plans. This includes earnings on after-tax amounts to a traditional IRA and the after-tax portion of the distribution to a Roth IRA. The guidance in Notice 2014-54 does not apply to distributions from IRAs.
The Dec. 23 issue of Employee Plans News also provides FAQs to help taxpayers apply the notice. That issue has not yet been posted online, but when it is, you can download it here.
