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The Complainant is Allianz SE of Munich, Germany, represented by in-house counsel.
The Respondents are Venkateshwara Distributor Private Limited of Mumbai, India and PrivacyProtect.org of Moergestel, Netherlands. For the sake of simplicity, the Respondents will be jointly referred to as the Respondent, unless otherwise indicated.
The disputed domain name <wwwallianz.com> is registered with Directi Internet Solutions Pvt. Ltd. d/b/a PublicDomainRegistry.com (“the Registrar”).
The Complaint was filed with the WIPO Arbitration and Mediation Center (the ”Center”) on June 10, 2010. On June 10, 2010, the Center transmitted by email to the Registrar a request for verification in connection with the disputed domain name. On June 15, 2010, the Registrar transmitted by email to the Center its verification response advising that PrivacyProtect.org was merely a privacy service enabled by Respondent Venkateshwara Distributor Private Limited, and providing the latter’s contact details. The Center sent an email communication to the Complainant on June 18, 2010 providing the registrant and contact information disclosed by the Registrar, and inviting the Complainant to submit an amendment to the Complaint, but without the Complainant being required to do so. The Complainant filed an amendment to the Complaint on June 21, 2010, naming Venkateshwara Distributor Private Limited as Respondent in addition to PrivacyProtect.org. The Center verified that the amended Complaint satisfied the formal requirements of the Uniform Domain Name Dispute Resolution Policy (the ”Policy” or ”UDRP”), the Rules for Uniform Domain Name Dispute Resolution Policy (the ”Rules”), and the WIPO Supplemental Rules for Uniform Domain Name Dispute Resolution Policy (the ”Supplemental Rules”).
In accordance with the Rules, paragraphs 2(a) and 4(a), the Center formally notified the Respondent of the Complaint, and the proceedings commenced on June 29, 2010. In accordance with the Rules, paragraph 5(a), the due date for Response was July 19, 2010. The Respondent did not submit any response. Accordingly, the Center notified the Respondent’s default on July 20, 2010.
The Center appointed Reynaldo Urtiaga Escobar as the sole panelist in this matter on July 28, 2010, having previously received his Statement of Acceptance and Declaration of Impartiality and Independence, as per the Rules, paragraph 7. The Panel finds that it was properly constituted.
The administrative proceedings were conducted in English for this was the language of the disputed domain name’s Registration Agreement.
The Complainant, who was founded in 1890, is one of the leading integrated financial services providers in the world with revenues totaling 97.4 billion Euros in 2009, and 152,000 employees serving 75 million customers in about 70 countries.
The Complainant offers a wide range of insurance, banking, and asset management products worldwide under the ALLIANZ mark, which has long been used in commerce and is registered since 1979 in Germany and other countries in connection with insurance and financial services pertaining to international class 36.
To provide information on the company and its various lines of business, the Complainant maintains a website under “www.alianz.com” since 1997, in addition to several other country-based domain names.
The Respondent registered the domain name <wwwallianz.com> on January 27, 2005. The disputed domain name resolves to a website featuring click-through advertisement links and banners related to the insurance, banking and financial industry.
After three unsuccessful attempts to get the Respondent to surrender the disputed domain name, the Complainant commenced the instant proceedings.
(xii) The Respondent’s intention when registering and using the disputed domain name has been twofold, on the one hand taking unfair advantage of the ALLIANZ trademark, and on the other, to confuse customers, as confirmed by the fact that over fifty percent of all the hyperlinks contained in the Respondent’s website refer to insurance topics.
Even though the Respondent’s default does not spare the Complainant the onus of establishing the three elements required by paragraph 4(a) of the Policy (see section 4.6 of the WIPO Overview of WIPO Panels Views on Selected UDRP Questions), the Panel may accept all reasonable and supported allegations and inferences made in the Complaint as true. See Charles Jourdan v. Holding AG v. AAIM, WIPO Case No. D2000-0403 (finding it appropriate for the panel to draw adverse inferences from the respondent’s failure to reply to the complaint) and also Vertical Solutions Mgmt., Inc. v. webnet-marketing, Inc., NAF Case No.95095 (holding that the respondent’s default allows all reasonable inferences of fact in the allegations of the complainant to be deemed true).
As noted by the overwhelming majority of UDRP Panels, the question under paragraph 4(a) of the Policy is whether the domain name at issue is confusingly similar to the Complainant’s mark, not whether the website to which the subject domain name resolves will confuse Internet users. See The Vanguard Group, Inc. v. John Zuccarini, WIPO Case No. D2002-0834 (A complainant need not establish actual confusion because the test is objective, not subjective).
Accordingly, from a literal comparison between <wwwallianz> representing the relevant portion of the disputed domain name, and ALLIANZ, it becomes noticeable that the Complainant’s service mark is wholly contained in the Respondent’s domain name, the only difference being the presence of the generic prefix “www” in the domain name.
The authority is legion under the Policy that a finding of confusing similarity is warranted where the disputed domain name embodies the well-known acronym for “world wide web”, - commonly referred to as the Web -, since “www” is the default sub domain in most website addresses. See Reuters Limited v. Global Net 2000, Inc., WIPO Case No. D2000-0441 (the letters “www” have no distinguishing capacity in the context of domain names for they represent, when succeeded by a period, an extremely common, although not universal, prefix to the domain name in a URL for a web page on the Internet); and MasterCard International Incorporated v. DL Webb, WIPO Case No. D2008-0324 (the addition of the “www” prefix is insufficient to differentiate the complainant’s mark from the domain name and does not prevent confusion between <wwwmastercard.com> and MASTERCARD).
As a result, this Panel finds that the Complainant has established the first threshold of paragraph 4(a) of the Policy.
The Complainant warrants and represents that the Respondent holds no trademark registrations consisting of or comprising the ALLIANZ name, and at the same time that it has never licensed, authorized or consented to the use of its ALLIANZ service mark by the Respondent.
Furthermore, the Complainant submits that the Respondent’s association of <wwwallianz.com> to a website that profits from the fame and goodwill of the Complainant and its ALLIANZ trademark cannot give rise to rights or legitimate interests in the disputed domain name to the benefit of the Respondent.
Given the worldwide notoriety of the ALLIANZ mark in connection with the provision of insurance and financial services, the Panel has no difficulty in endorsing the Complainant’s proposition that the Respondent is precluded from being commonly known by the disputed domain name, even more so where the latter resolves to a competing website.
The evidence on record shows that the Respondent is not making a legitimate noncommercial or fair use of <wwwallianz.com> without intent for commercial gain to misleadingly divert consumers, nor is it using the disputed domain name in connection with a bona fide offering of goods or services as the resolving website actually deflects Internet traffic intended for the Complainant to a website providing sponsored hyperlinks about insurance, banking, and financial products under the ALLIANZ brand name. See United Parcel Service of America, Inc. v. Michael Robert, WIPO Case No. D2008-0339 (Respondent presumably earns revenues from the website at the domain name when Internet users click on sponsored advertising links. This constitutes neither a bona fide offering of goods and services under the domain name, nor a non-commercial or fair use thereof).
In sum, on the evidence and legal argument submitted, and in view of the Respondent’s default, the Panel is prepared to accept that none of the defenses set forth in 4(c) of the Policy is available to the Respondent.
Accordingly, the Complainant has demonstrated the second limb of paragraph 4(a) of the Policy.
The Complainant argues that the Respondent could not have been unaware of the ALLIANZ trademark at the time of registering a domain name that is almost identical to the Complainant’s mark, which is well-known in the insurance and financial services industry, as acknowledged in several UDRP decisions and court rulings appended to the Complaint.
The Complainant further submits that since the Respondent’s website can be accessed without typing “www” before <wwwallianz.com>, it is clear that the Respondent has aimed from the beginning at netting Internet users who, in trying to enter the Complainant’s website, made a common typo. It is then the Complainant’s conclusion that the Respondent has unfairly profited from the ALLIANZ trademark’s fame by confusing the Complainant’s customers on the net.
It is to be noted that several UDRP decisions have characterized the registration of “wwwdomains” as a form of typosquatting amounting to bad faith for the purposes of the Policy, to the extent that such practice is intended to trap Internet users who, more often than not, forget to type the “dot” when entering the “www” convention. See Schering-Plough Corporation, Schering Corporation, Schering Plough Ltd. v. Stementali Quemistas, WIPO Case No. D2009-0841 (because many domain names begin with “www” followed by a period followed by the name of the web site, the disputed domain name is calculated to divert Internet traffic of end users seeking to find the website of the complainant, who accidentally omit the period after the “www” prefix. This is a classic case of typosquatting); and Compagnie Gervais Danone, Bonafont S.A. de C.V. v. PrivacyProtect.org, WIPO Case No. D2009-1659 (use of the prefix “www” added to the trademark itself is a strong indication of bad faith showing that the respondent intended to take unfair advantage of a common typing error on the part of Internet users).
Moreover, the evidence produced by the Complainant show that the Respondent’s website is made up exclusively of sponsored hyperlinks, advertising banners, and commercial pop-ups, without any goods or services being offered for sale. It is beyond cavil that this type of use of the domain name constitutes bad faith in the context of the Policy. See F. Hoffmann-La Roche AG v. Transure Enterprise Ltd., WIPO Case No. D2008-0422 (It is clear that <wwwroche.com> is being used to direct traffic to a website where the respondent obtains commercial gain through sponsored listings, which is demonstrative of bad faith use as per the Policy).
The Panel is therefore satisfied that the Complainant has met its burden under paragraph 4(a)(iii) of the Policy.
For all the foregoing reasons, in accordance with paragraphs 4(i) of the Policy and 15 of the Rules, the Panel orders that the domain name <wwwallianz.com> be transferred to the Complainant.

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Herbert S. Moncier and J. Anthony Farmer, Knoxville, Tenn., for plaintiffs.
Jon Roach, City Law Director, Knoxville, Tenn., for defendants.
ROBERT L. TAYLOR, Chief Judge.
The City of Knoxville is an employer within the meaning of 29 U.S.C. § 630(b). Each of the plaintiffs was employed by defendant City of Knoxville prior to December 31, 1982 in either the police or fire department for the City of Knoxville. On December 16, 1982 upon the written recommendation of the Director of Public Safety for the City of Knoxville, Harold Shipley, Randy Tyree, Mayor of defendant City of Knoxville, notified plaintiffs in writing that they were to be involuntarily retired pursuant to Section 122 of the Charter for the City of Knoxville on the basis that they had reached the age of fifty years and had completed twenty-five years in the service of the City of Knoxville.
Plaintiffs, in an attempt to prevent their involuntary retirements, immediately filed an action in State court seeking to enjoin their involuntary retirements. Plaintiffs' State court action was based upon Tenn. Code Ann. § 4-21-105 which purports to prohibit employment discrimination based upon age. By agreement, plaintiffs were allowed to continue their employment until January 31, 1983. The State action terminated in the entry of a judgment on January 26, 1983 denying plaintiffs relief under the relevant Tennessee legislation, the United States Constitution, and the Tennessee Constitution.
Plaintiffs thereafter on February 7, 1983 filed charges of age discrimination with the Equal Employment Opportunity Commission against defendants based upon plaintiffs' allegations that defendants were in violation of the Age Discrimination in Employment Act enacted by the Congress of the United States. Upon receipt of the charges, the agents and representatives of the Equal Employment Opportunity Commission contacted defendants in an attempt to investigate and conciliate the charges of discrimination as alleged by plaintiffs. Defendants failed and refused to respond to the inquiries and attempts of conciliation of the Equal Employment Opportunity Commission.
Plaintiffs, at the time of their involuntary retirements, effective December 31, 1982 were satisfactorily performing the jobs they held with defendant City of Knoxville. Section 122 of the Charter for the City of Knoxville upon which defendants have relied in forcing the retirements of plaintiffs is not based upon a bona fide occupational qualification of age fifty. Plaintiffs were terminated based upon the allegations of defendants that a reduction in force was necessitated by revenue shortfalls and not because plaintiffs were not able to perform the jobs they held or were not satisfactorily performing them, but solely because plaintiffs had reached the age of fifty years and had completed twenty-five years of service to the City of Knoxville.
At the time defendants involuntarily retired plaintiffs, the application of the Age Discrimination in Employment Act to states and municipalities was an unsettled question of law. The issue was then pending before the Supreme Court in the case of Equal Employment Opportunity v. Wyoming, ___ U.S. ___, 103 S.Ct. 1054, 75 L.Ed.2d 18 (1983). The Court held on March 2, 1983 that the extension of the Age Discrimination in Employment Act to cover state and local governments is a valid exercise of Congress' powers under the Commerce Clause and is not precluded by the Tenth Amendment. See Id.
The Court's jurisdiction in this case is based upon 28 U.S.C. § 1331 and § 1343. Jurisdiction is additionally conferred by § 7(b) of the Age Discrimination in Employment Act, 29 U.S.C. § 626(b) and by § 17 of the Fair Labor Standards Act, 29 U.S.C. § 217.
Section 122 of the Charter for the City of Knoxville, as copied and set out in the Stipulations of the parties and as it existed on December 16, 1982, is in violation of the Age Discrimination in Employment Act as adopted by Congress, in that this Charter provision allows the defendant employer, City of Knoxville, to unlawfully force the retirement of its employees solely on the basis of age. The age of fifty years as provided in Section 122 of the Charter of the City of Knoxville and in effect on December 16, 1982 does not constitute a bona fide occupational qualification as provided in the Age Discrimination in Employment Act for the positions held and the duties performed by plaintiffs, members of the Knoxville fire and police departments. The involuntary retirements of plaintiffs even when based upon legitimate economic reasons as alleged by defendants are not lawful, in that existing economic conditions do not allow employers to avoid the congressionally enacted prohibition against age discrimination. See Blackwell v. Sun Electric Corp., 696 F.2d 1176, 1180 n. 5 (6th Cir. 1983).
The institution of litigation in the State court in reliance upon State legislation purporting to prohibit age discrimination does not bar or estop plaintiffs from pursuing their action herein in that plaintiffs are required to commence state action pursuant to 29 U.S.C. § 633(b). The commencement and termination of plaintiffs' action pursuant to the Tennessee statutes upon which plaintiffs relied did not represent a full and fair hearing on the merits of plaintiffs' allegations of discrimination based upon age as required by the United States Supreme Court. See Kremer v. Chemical Construction Corp., 456 U.S. 461, 102 S.Ct. 1883, 72 L.Ed.2d 262 (1982). The issues raised in the State action were not the same as or equivalent to the issues raised in the action sub judice, Montana v. United States, 440 U.S. 147, 99 S.Ct. 970, 59 L.Ed.2d 210 (1979), and the termination of the State action does not bar or estop this action. The actions of the plaintiffs herein are not barred by the tenth or fourteenth amendments to the Constitution of the United States. See Equal Employment Opportunity Commission v. Wyoming, ___ U.S. ___, 103 S.Ct. 1054, 75 L.Ed.2d 18 (1983).
The actions by the defendants were not willful violations of the Age Discrimination in Employment Act. They were taken in good faith and reliance on the theory that the Act could not constitutionally be applied to the City.
For the foregoing reasons, it is ORDERED that plaintiffs be reinstated to the positions they held prior to their unlawful retirement. It is further ORDERED that plaintiffs recover damages equivalent to their loss of compensation, fringe benefits, and accumulated annual sick leave, minus any amounts received as retirement incentive bonuses from the City of Knoxville.


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On the same day that an information was filed in a state court charging him with murder, a 17-year-old defendant was arraigned, convicted on his plea of guilty, and sentenced to life imprisonment. He had no counsel, and none was offered or assigned; the court did not apprise him of the consequences of his plea of guilty; no evidence was offered in his behalf, and none of the State's witnesses was cross-examined.
Held: that he was deprived of rights essential to a fair hearing under the Federal Constitution. P. 329 U. S. 665.
313 Mich. 548, 21 N.W.2d 849, reversed.
court affirmed. 313 Mich. 548, 21 N.W.2d 849. This Court granted certiorari. 329 U.S. 702. Reversed, p. 329 U. S. 665.
In conformity with Michigan procedure, petitioner moved for leave to file a delayed motion for new trial in the court in which he had been convicted of first degree murder. Serious impairment of his constitutional rights at the arraignment and trial were asserted as grounds for the motion. The trial court denied the motion, and the Supreme Court of Michigan, on appeal, affirmed that ruling. 313 Mich. 548, 21 N.E.2d 849. We granted certiorari because of the importance of the constitutional issues presented. 329 U.S. 702.
evidence in petitioner's behalf was introduced at the trial, and none of the State's witnesses was subjected to cross-examination.
After reviewing the foregoing facts, the Supreme Court of Michigan determined that the record revealed no deprivation of petitioner's constitutional rights. The court indicated that it had given consideration to the case of Hawk v. Olson, 326 U. S. 271, and the authorities cited therein, but concluded that the rule of the Michigan cases was determinative. See People v. Williams, 1923, 225 Mich. 133, 195 N.W. 818. In this, there was error.
Here, a seventeen year old defendant confronted by a serious and complicated criminal charge, was hurried through unfamiliar legal proceedings without a word being said in his defense. At no time was assistance of counsel offered or mentioned to him, nor was he apprised of the consequences of his plea. Under the holdings of this Court, petitioner was deprived of rights essential to a fair hearing under the Federal Constitution. Powell v. Alabama, 287 U. S. 45; Williams v. Kaiser, 323 U. S. 471; Tompkins v. Missouri, 323 U. S. 485; White v. Ragen, 324 U. S. 760; Hawk v. Olson, supra. See Betts v. Brady, 316 U. S. 455.

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Subject to the authority of the Secretary, the Chief Operating Officer of a PBO may exercise the authority of the Secretary to procure property and services in the performance of functions managed by the PBO. For the purposes of this section, the term “PBO” includes the Chief Operating Officer of the PBO and any employee of the PBO exercising procurement authority under the preceding sentence.
assess the efficiency of such systems and assess such systems’ ability to meet PBO requirements.
The Chief Operating Officer shall, to the extent practicable, maximize the use of performance-based servicing contracts, consistent with guidelines for such contracts published by the Office of Federal Procurement Policy, to achieve cost savings and improve service.
The Chief Operating Officer shall, when appropriate and consistent with the purposes of the PBO, acquire services related to the functions set forth in section 1018(b)(2) of this title from any entity that has the capability and capacity to meet the requirements set by the PBO. The Chief Operating Officer is authorized to pay fees that are equivalent to those paid by other entities to an organization that provides services that meet the requirements of the PBO, as determined by the Chief Operating Officer.
The PBO may use a two-phase process for selecting a source for a procurement of property or services.
A general description of the scope or purpose of the procurement that provides sufficient information on the scope or purpose for sources to make informed business decisions regarding whether to participate in the procurement.
A description of the basis on which potential sources are to be selected to submit offers in the second phase.
A description of the information that is to be required under subparagraph (B).
Any additional information that the contracting officer determines appropriate.
Each offeror for the procurement shall submit basic information, such as information on the offeror’s qualifications, the proposed conceptual approach, costs likely to be associated with the proposed conceptual approach, and past performance of the offeror, together with any additional information that is requested by the contracting officer.
The contracting officer shall select the offerors that are to be eligible to participate in the second phase of the process. The contracting officer shall limit the number of the selected offerors to the number of sources that the contracting officer determines is appropriate and in the best interests of the Federal Government.
The contracting officer shall conduct the second phase of the source selection process in accordance with sections 3306(a) to (e) and 3308, chapter 37, and section 4702 of title 41.
Only the sources selected in the first phase of the process shall be eligible to participate in the second phase.
The second phase may include a single procurement or multiple procurements within the scope, or for the purpose, described in the notice pursuant to paragraph (2)(A).
The procedures used for selecting a source for a procurement under this subsection shall be considered competitive procedures for all purposes.
the expiration of the authority to use special simplified procedures under section 4202(e) of the Clinger-Cohen Act of 1996 (110 Stat. 654; 10 U.S.C. 2304 note).
notwithstanding subsection (a)(3) of such section, establish any deadline for the submission of bids or proposals that affords potential offerors a reasonable opportunity to respond to the solicitation.
Paragraph (1) does not apply to a procurement of a commercial item.
If an international agreement is applicable to the procurement, any exercise of authority under paragraph (1) shall be consistent with the international agreement.
The PBO may satisfy the requirements of the PBO for a system incrementally by carrying out successive procurements of modules of the system. In doing so, the PBO may use procedures authorized under this subsection to procure any such module after the first module.
A module may not be procured for a system under this subsection unless the module is useful independently of the other modules or useful in combination with another module previously procured for the system.
a statement that procedures authorized under this subsection could be used for awarding subsequent contracts for the procurement of additional modules for the system.
Award of the contract on a single-source basis to a contractor who was awarded a contract for a module previously procured for the system under competitive procedures or procedures authorized under subparagraph (B).
at least one other offeror that submitted an offer for a module previously procured for the system and is expected, on the basis of the offer for the previously procured module, to submit a competitive offer for the additional module.
Award of the contract under any other procedure authorized by law.
Not less than 30 days before issuing a solicitation for offers for a contract for a module for a system under procedures authorized under subparagraph (A) or (B) of paragraph (4), the PBO shall publish in the Commerce Business Daily a notice of the intent to use such procedures to enter into the contract.
Publication of a notice is not required under this paragraph with respect to a use of procedures authorized under paragraph (4) if the contractor referred to in that subparagraph (who is to be solicited to submit an offer) has previously provided a module for the system under a contract that contained cost, schedule, and performance goals and the contractor met those goals.
A notice published under subparagraph (A) with respect to a use of procedures described in paragraph (4) shall contain the information required under section 1708(c) of title 41, other than paragraph (4) of such section, and shall invite the submission of any assertion that the use of the procedures for the procurement involved is not in the best interest of the Federal Government together with information supporting the assertion.
The basis for an award of a contract under this subsection shall be documented. However, a justification pursuant to section 3304(e) of title 41 or section 637(h) of title 15 is not required.
The PBO may award a contract under any other simplified procedures prescribed by the PBO for the selection of sources for the procurement of modules for a system, after the first module, that are not to be procured under a contract awarded on a single-source basis.
the price charged for supplies associated with the services procured are items of supply expected to be less than 20 percent of the total contract price.
The Chief Operating Officer of the PBO, in consultation with the Administrator for Federal Procurement Policy, shall issue guidance for the use by PBO personnel of the authority provided in this section.
As part of the consultation required under paragraph (1), the Administrator for Federal Procurement Policy shall provide the PBO with guidance that is designed to ensure, to the maximum extent practicable, that the authority under this section is exercised by the PBO in a manner that is consistent with the exercise of the authority by the heads of the other performance-based organizations.
The head of the PBO shall ensure that the procurements of the PBO under this section are carried out in a manner that is consistent with the guidance provided for the PBO under paragraph (2).
No department or agency of the Federal Government may purchase property or services under contracts entered into or administered by a PBO under this section unless the purchase is approved in advance by the senior procurement official of that department or agency who is responsible for purchasing by the department or agency.
Nothing in this section shall be construed to waive laws for the enforcement of civil rights or for the establishment and enforcement of labor standards that are applicable to contracts of the Federal Government.
The term “commercial item” has the meaning given the term in section 103 of title 41.
The term “competitive procedures” has the meaning given the term in section 152 of title 41.
The term “single-source basis”, with respect to an award of a contract, means that the contract is awarded to a source after soliciting an offer or offers from, and negotiating with, only such source (although such source is not the only source in the marketplace capable of meeting the need) because such source is the most advantageous source for purposes of the award.
The term “special rules for commercial items” means the regulations set forth in the Federal Acquisition Regulation pursuant to sections 1901 and 3305(a) of title 41.
The term “special simplified procedures” means the procedures applicable to purchases of property and services for amounts not greater than the simplified acquisition threshold that are set forth in the Federal Acquisition Regulation pursuant to sections 1901(a)(1) and 3305(a)(1) of title 41.
Whenever the PBO anticipates that commercial products or commercial services will be offered for a procurement, the PBO may use (consistent with the special rules for commercial products and commercial services) the special simplified procedures for the procurement without regard to any dollar limitation otherwise applicable to the use of those procedures.
(B) notwithstanding subsection (a)(3) of such section, establish any deadline for the submission of bids or proposals that affords potential offerors a reasonable opportunity to respond to the solicitation.
Paragraph (1) does not apply to a procurement of a commercial product or a commercial service.
(C) the price charged for supplies associated with the services procured are items of supply expected to be less than 20 percent of the total contract price.
(B) a contract for construction.
The term “commercial product” has the meaning given the term in section 103 of title 41.
The term “commercial service” has the meaning given the term in section 103a of title 41.
The term “special rules for commercial products and commercial services” means the regulations set forth in the Federal Acquisition Regulation pursuant to sections 1901 and 3305(a) of title 41.
See 2018 Amendment notes below.
Section 4202(e) of the Clinger-Cohen Act of 1996, referred to in subsec. (e)(2), is section 4202(e) of Pub. L. 104–106, which is set out as a note under section 2304 of Title 10, Armed Forces.
In subsec. (d)(2)(A), “section 1708 of title 41” substituted for “section 18 of the Office of Federal Procurement Policy Act (41 U.S.C. 416)” on authority of Pub. L. 111–350, § 6(c), Jan. 4, 2011, 124 Stat. 3854, which Act enacted Title 41, Public Contracts.
In subsec. (d)(3)(A), “sections 3306(a) to (e) and 3308, chapter 37, and section 4702 of title 41” substituted for “sections 303A and 303B of the Federal Property and Administrative Services Act of 1949 (41 U.S.C. 253a and 253b)” on authority of Pub. L. 111–350, § 6(c), Jan. 4, 2011, 124 Stat. 3854, which Act enacted Title 41, Public Contracts.
In subsec. (f)(1)(A), “section 1708 of title 41” substituted for “section 18 of the Office of Federal Procurement Policy Act (41 U.S.C. 416)” on authority of Pub. L. 111–350, § 6(c), Jan. 4, 2011, 124 Stat. 3854, which Act enacted Title 41, Public Contracts.
In subsec. (g)(5)(C), “section 1708(c) of title 41” substituted for “section 18(b) of the Office of Federal Procurement Policy Act (41 U.S.C. 416(b))” on authority of Pub. L. 111–350, § 6(c), Jan. 4, 2011, 124 Stat. 3854, which Act enacted Title 41, Public Contracts.
In subsec. (g)(6), “section 3304(e) of title 41” substituted for “section 303(f) of the Federal Property and Administrative Services Act of 1949 (41 U.S.C. 253(f))” on authority of Pub. L. 111–350, § 6(c), Jan. 4, 2011, 124 Stat. 3854, which Act enacted Title 41, Public Contracts.
In subsec. (l)(1), “section 103 of title 41” substituted for “section 4(12) of the Office of Federal Procurement Policy Act (41 U.S.C. 403(12))” on authority of Pub. L. 111–350, § 6(c), Jan. 4, 2011, 124 Stat. 3854, which Act enacted Title 41, Public Contracts.
In subsec. (l)(2), “section 152 of title 41” substituted for “section 309(b) of the Federal Property and Administrative Services Act of 1949 (41 U.S.C. 259(b))” on authority of Pub. L. 111–350, § 6(c), Jan. 4, 2011, 124 Stat. 3854, which Act enacted Title 41, Public Contracts.
In subsec. (l)(4), “sections 1901 and 3305(a) of title 41” substituted for “section 303(g)(1) of the Federal Property and Administrative Services Act of 1949 (41 U.S.C. 253(g)(1)) and section 31 of the Office of Federal Procurement Policy Act (41 U.S.C. 427)” on authority of Pub. L. 111–350, § 6(c), Jan. 4, 2011, 124 Stat. 3854, which Act enacted Title 41, Public Contracts.
In subsec. (l)(5), “sections 1901(a)(1) and 3305(a)(1) of title 41” substituted for “section 303(g)(1)(B) of the Federal Property and Administrative Services Act of 1949 (41 U.S.C. 253(g)(1)(A)) and section 31(a)(1) of the Office of Federal Procurement Policy Act (41 U.S.C. 427(a)(1))” on authority of Pub. L. 111–350, § 6(c), Jan. 4, 2011, 124 Stat. 3854, which Act enacted Title 41, Public Contracts.
A prior section 1018a, Pub. L. 89–329, title I, § 142, as added Pub. L. 100–418, title VI, § 6201, Aug. 23, 1988, 102 Stat. 1515, related to grants for literacy corps programs, prior to the general amendment of this subchapter by Pub. L. 102–325.
Subsec. (f). Pub. L. 115–232, § 836(g)(2)(B)(i), substituted “products and services” for “items” in heading.
Subsec. (f)(2). Pub. L. 115–232, § 836(g)(2)(B)(ii), (iii), substituted “products and services” for “items” in heading and “a commercial product or a commercial service” for “a commercial item” in text.
Subsec. (h). Pub. L. 115–232, § 836(g)(2)(C)(i), substituted “services” for “items” in heading.
Subsec. (h)(1). Pub. L. 115–232, § 836(g)(2)(C)(ii), substituted “commercial services” for “commercial items” in introductory provisions.
Subsec. (l)(1), (2). Pub. L. 115–232, § 836(g)(2)(D)(ii), added pars. (1) and (2) and struck out former par. (1) which defined “commercial item”. Former par. (2) redesignated (3).
Subsec. (l)(3). Pub. L. 115–232, § 836(g)(2)(D)(i), (iii), redesignated par. (2) as (3) and substituted “in section 152 of title 41.” for “in section 309(b) of the Federal Property and Administrative Services Act of 1949 (41 U.S.C. 259(b)).” Former par. (3) redesignated (4).
Subsec. (l)(4). Pub. L. 115–232, § 836(g)(2)(D)(i), redesignated par. (3) as (4). Former par. (4) redesignated (5).
Subsec. (l)(5). Pub. L. 115–232, § 836(g)(2)(D)(i), (iv), redesignated par. (4) as (5) and substituted, in heading, “commercial products and commercial services” for “commercial items” and, in text, “commercial products and commercial services” for “commercial items” and “pursuant to sections 1901 and 3305(a) of title 41.” for “pursuant to section 303(g)(1) of the Federal Property and Administrative Services Act of 1949 (41 U.S.C. 253(g)(1)) and section 31 of the Office of Federal Procurement Policy Act (41 U.S.C. 427).” Former par. (5) redesignated (6).
2008—Subsec. (b)(1). Pub. L. 110–315, § 118(1)(A), struck out “for information systems supporting the programs authorized under subchapter IV” after “enter into contracts” and “and” after semicolon.
Subsec. (b)(2), (3). Pub. L. 110–315, § 118(1)(B), (C), substituted “; and” for period at end of par. (2) and added par. (3).
Subsec. (d)(2)(B). Pub. L. 110–315, § 118(3), struck out “on Federal Government contracts” after “performance of the offeror”.
Subsec. (g)(4)(A). Pub. L. 110–315, § 118(4)(A), substituted “Single-source basis” for “Sole source” in heading and “single-source” for “sole-source” in text.
Subsec. (g)(7). Pub. L. 110–315, § 118(4)(B), substituted “single-source” for “sole-source”.
Subsec. (h)(2)(A). Pub. L. 110–315, § 118(5), substituted “single-source” for “sole-source”.
Amendment by Pub. L. 115–232 effective Jan. 1, 2020, subject to a savings provision, see section 836(h) of Pub. L. 115–232, set out as an Effective Date of 2018 Amendment; Savings Provision note under section 453b of Title 6, Domestic Security.


Yes indeed, the Internal Revenue Service has been hard at work. On April 17, 2002 it published final regulations that provide an abundance of well-marked routes to follow when planning required distributions from IRAs, qualified retirement plans and §403(b) plans. The Service even managed to clarify most, but not all, of the ambiguities that existed in the 2001 reproposed regulations. Finally, Marjorie Hoffman, Cathy Vohs and their respective staffs at the IRS and Department of Treasury threw in a surprise bonus -- a new set of life expectancy tables. Granted, the text of the final regulations covers approximately 104 printed pages compared to only 39 pages for the original 1987 proposed edition, but the results are worthwhile.
Most taxpayers mistakenly believe that the required distribution rules spelled out in §401(a)(9) of the Internal Revenue Code only apply to lifetime distributions beginning at age 70½. Failure to consider the numerous financial and estate planning implications of those tax provisions can lead to unpleasant complications during retirement and substantial financial loss for survivors. Everyone with assets in a retirement plan, regardless of their age, needs to have a reasonable understanding of minimum required distributions. In certain circumstances, that understanding can be more valuable than the selection of a prudent investment.
Unfortunately, the complexity associated with this area of the tax law intimidates many taxpayers. If you readily identify with that group, rest assured you have plenty of company. Even competent tax practitioners often miss the financial and estate planning implications associated with required distributions although they understand how to apply those rules when preparing a tax return.
The following questions provide a quick way to gauge your knowledge of this subject.
If a QTIP trust is used as a beneficiary for a qualified plan, what resource document spells out the guidelines that such a trust must follow in order to qualify for the marital deduction and also satisfy the minimum distribution rules?
If you feel hesitant about your answers to these questions, seek assistance from a knowledgeable tax professional. You will know that person truly understands this subject if he or she can readily answer the same questions. If you receive a vague or evasive response, please contact another professional. The decisions you must make are too important to rely on guesswork or incompetent advice.
The 2002 Rules of the Road and 2002 Assorted Planning Pointers that follow this introduction provide technical assistance for those wishing to improve their understanding or research a specific question. Please note, however, that this document should not be used as a substitute for the knowledge and insights available from a well-trained professional who routinely deals with these issues. Readers who undertake their own planning are urged to double-check their conclusions by obtaining a professional opinion before implementing those plans. In addition, please peruse the following disclaimer.
Readers must take note that information presented in this document reflects the authors attempt to describe various points of the Federal tax law. Some important topics have been omitted. Keep in mind that state tax laws may differ from the Federal rules. While every effort has been made to accurately report the provisions of the Internal Revenue Code and the Regulations pertaining thereto, it is possible that a misrepresentation has occurred. Naturally, the Code and Regulations control the tax treatment of any situation, not the authors interpretation. Therefore, taxpayers should rely on the tax law rather than positions put forth in this paper.
George Coughlin is NOT responsible for, and cannot control the content of, the material listed in Other Resources below. In fact, those reference items, software programs and web sites may provide incorrect information, produce inaccurate results or make false statements. Furthermore, any investment or insurance advice as well as recommendations to purchase or sell securities you receive from a resource listed on IRAplanning.com does NOT involve George Coughlin or George Harper Coughlin II Registered Investment Advisor. Please use appropriate caution.
Which Retirement Plans Are Impacted and When Do The New Rules Take Effect?
The final regulations on required distributions published by the Service on April 17, 2002 apply to both defined contribution and defined benefit plans under §401(a). They also impact individual retirement accounts and individual retirement annuities under §408. In addition, they cover §403(b) tax sheltered annuity (TSA) contracts purchased, or custodial accounts or retirement income accounts established, by a §501(c)(3) organization or public school. Lastly, the 2002 rules pertain to required distributions from certain deferred compensation plans for employees of state and local governments under §457(d)(2).
The final regulations apply to distributions for calendar years beginning on or after January 1, 2003 that come from all account balances and benefits in existence on or after January 1, 1985. [§1.401(a)(9)-1, A-2] For distributions for the 2002 calendar year, taxpayers may rely on the final regulations, the 2001 proposed regulations or the 1987 proposed regulations. In the case of distributions during a participants lifetime, the final regulations will produce the lowest required distribution in all cases that the author has explored. The same is true when calculating most, but NOT all, postmortem distributions. Therefore, beneficiaries would be wise to compute minimum distributions under all three possibilities so they can be certain that their choice is the most favorable.
Please note that throughout this text the expression qualified retirement plan(s) or qualified plan(s) is used to denote pension plans, profit sharing plans, stock bonus plans, traditional individual retirement accounts (IRAs) under IRC §408, Roth IRAs under IRC §408A and tax sheltered annuities under IRC §403(b). Whenever IRC §401(a)(9) does not apply uniformly to all six entities, the exception will be noted. None of the comments on these pages address the application of IRC §401(a)(9) to so-called Section 457 Plans for government workers. Furthermore, the text does not include a discussion of annuity payments from a defined benefit plan, an individual retirement annuity or an annuity contract purchased by an individual account in a defined contribution plan.
It is important to remember that a Roth IRA provides several significant exemptions from IRC §401(a)(9). The first is an avoidance of required distributions during the owners lifetime. That is to say, Roth IRAs are immune from IRC §401(a)(9)(A). They are also exempt from the Minimum Distribution Incidental Benefit provisions of IRC §401(a). Furthermore, Roth IRAs are not impacted by IRC §401(a)(9)(B)(i) when the owner dies. Instead, beneficiaries need only adhere to the relatively straightforward procedures of IRC §401(a)(9)(B)(ii) and (iii). Essentially, those are the same rules that apply to non-spouse beneficiaries when traditional IRA owners die before their required beginning date. That means beneficiaries have only one set of rules to follow regardless of the age of the Roth IRA owner on his/her date of death.
Why Were The Minimum Distribution Rules Created?
Simply put, money set aside and accumulated in qualified retirement plans is granted favorable tax treatment with the expectation that it will be used for retirement income purposes. To curtail one potential abuse of that opportunity, Congress decided to set duration limits on the tax deferral aspect of all qualified retirement plans. IRC §401(a)(9) is the mechanism to accomplish that objective. Under the guidelines contained in that paragraph, everyone is forced to begin making withdrawals at a prescribed level from all their retirement plans at a specified date even if they do not need the extra revenue and/or would prefer to leave the capital in their respective plans.
When When Do The Rules Come Into Play and How Do They Operate?
The minimum distribution rules are best known for their impact on taxpayers that have reached age 70½. Those are the so-called living requirements. However, they have an equally important impact following the death of the plan participant.
A. Unless a limited exception applies (see page 6), the living aspects of the required distribution provisions found in IRC §401(a)(9)(A) kick into gear during the year a participant reaches age 70½.
1. Technically speaking, the withdrawal for the first distribution calendar year may be delayed until April 1 of the year immediately following the year in which someone attains age 70½. That date is referred to as their Required Beginning Date or RBD. [§401(a)(9)(C)] Please follow the hyperlink in the preceding sentence for a complete definition of RBD -- including an exception for certain participants as well as a definition of distribution calendar year.
B. The same paragraph of the Internal Revenue Code that mandates lifetime withdrawals also stipulates the minimum distributions that must be carried out following the death of a participant. The postmortem rules break down into two subcategories depending on when the participant dies.
1. If death takes place before the required beginning date, the final regulations closely parallel the provisions of the 2001 and 1987 proposed regulations. It should be noted, however, that if the account has a Designated Beneficiary, the default method in the final regulations is the life expectancy rule, referred to below as the General and Spousal Exceptions. In the 1987 proposed regulations, the Five-Year Rule served as the default. Under certain circumstances, that subtle shift can have a favorable impact on beneficiaries that are otherwise eligible to use the General Exception but failed to meet the requisite deadline to commence those distributions. See item S in the Assorted Planning Pointers for more details.
2. If the participant dies on or after the RBD, his/her assets remaining in the qualified plan must be distributed at least as rapidly as under the METHOD of distribution being used to satisfy the MRD rules on the date of the participants death. [§401(a)(9)(B)(i)] The final regulations published on April 17, 2002 significantly modify the Services previous interpretation of the at least as rapidly rule that was explained in the original proposed regulations published in 1987. [§1.401(a)(9)-2, A-5] The postmortem provisions of the final regulations appear in flow chart format on Tables 25A and 25B of this document. The financial implications of those rules are illustrated on Tables 27A through 29C.
What Is The Minimum Annual Distribution During Your Lifetime?
A. Calculating minimum required distributions during a participants lifetime is relatively straightforward. The process is represented by the following mathematical equation.
1. With one rather unique exception outlined immediately below, the Applicable Distribution Period used in the formula for each year, including the year of the participants death, is the factor shown on the Uniform Lifetime Table shown in §1.401(a)(9)-9, A-2 that corresponds to the participants age as of that persons birthday in the relevant distribution calendar year.
3. Table 21A of this document entitled Calculating Minimum Required Distributions During Participants Lifetime provides an example of the calculation process. Also attached is Table 21B listing all the distribution periods from the Uniform Lifetime Table.
2. It is not permissible to take IRA minimum required distributions from a low yielding TSA or vice versa. Furthermore, withdrawals from a Roth IRA will not satisfy the distribution requirements applicable to Traditional IRAs or §403(b) accounts. In addition, assets removed from those accounts cannot be used to fulfill the postmortem MRDs from Roth IRAs.
While the final regulations issued by the Service in April of 2002 are a lot less complex than the original ones published in 1987, they do not fall under the heading tax simplification. These 2002 Rules of the Road still require travelers to know the definition of a few important terms and have a working knowledge of several interdependent concepts before leaving home for a trip across town.
A. Required Beginning Date (RBD): All IRA owners as well as participants in qualified plans that own more than five percent of the sponsoring employer must begin distributions no later than April 1 of the year following the year in which the participant attains age 70½. The RBD for all other employees and §403(b) plan participants is April 1 of the calendar year following the later of either: (1) the calendar year in which the employee attains age 70½, or (2) the calendar year in which the employee retires from employment with the employer maintaining the plan. [§401(a)(9)(C)] Note, however, that under §1.401(a)(9)-2, A-2(e) a plan may elect to use the RBD rules mandated for IRAs for all employees, i.e., April 1 of the year following the year the employee attains age 70½. Therefore, it is necessary to determine if such an election has been made for the plan in question before it is possible to be certain about the Required Beginning Date for its participants. It is also important to keep in mind that the special rule for extending the RBD only applies to qualified plans and §403(b) plans maintained by the participants current employer. The RBD rules for all plans associated with a former employer are the same as for IRAs.
E. Designated Beneficiary (DB): A Designated Beneficiary is an individual who is entitled to receive a portion of the benefits of a qualified plan following the death of the participant or another specified event. It is important to note that it is possible to name a beneficiary for a qualified plan but NOT have a Designated Beneficiary. (See item J below for examples.) Please refer to Item G below for a discussion of how to identify a DB when a trust serves as beneficiary. Readers should also become familiar with the comments in Item L below that deal with the necessity to redetermine the identify of an accounts DBs if the participant died before 2003.
a) It is not valid if merely stipulated under state law.
b) It is not valid to simply use a joint and last survivor annuity settlement without also naming a beneficiary.
3. Under the final regulations, a Designated Beneficiary must be a beneficiary as of the participants date of death and remain a beneficiary on the Designation Date. Consequently, any person who is a beneficiary as of the date of the participants death, but is not a beneficiary on September 30 of the following year, is ignored. [§1.401(a)(9)-4, A-4(a)] That same citation in the final regulations mentions two circumstances in which a beneficiary on the participants date of death would not be considered a beneficiary as of Designation Date.
a) If a beneficiary executes a qualified disclaimer under I.R.C. §2518 by the Designation Date, that person will not be taken into account in determining the participants Designated Beneficiaries. When reading this provision please remember that unless a participant actually died on December 31, the deadline for making a qualified disclaimer differs from the September 30 Designation Date.
b) If a beneficiary receives the entire benefit to which he or she is entitled before September 30 of the year following the year in which the participant died, that person or entity will not be considered a beneficiary for designated beneficiary purposes.
F. Designation Date: The designation date is September 30 of the year immediately following the year of a participants death. This is the date of record used when determining if an account has one or more Designated Beneficiaries. See paragraph 3 in item E above for more details. Please note that this term is the authors own creation. It does not appear in the Code or Regulations.
G. Trust As Beneficiary: Under certain circumstances specified in the final regulations, DB status can be achieved if a trust is named as beneficiary. Please note that the trust itself is not the Designated Beneficiary since only an individual human being may be a DB. However, the beneficiaries of the trust will qualify as DBs if the trust meets certain requirements. [§1.401(a)(9)-4, A-5(a)] Table 23 lists a summary of those requirements that are spelled out in detail below.
a) The trust is valid under state law, or would be but for the fact that there is no corpus.
b) The trust is irrevocable or will, by its terms, become irrevocable upon the death of the participant.
c) The trusts own beneficiaries who will be receiving proceeds from the qualified plan are named individuals or identifiable from the trust instrument, e.g., a class of beneficiaries such as spouse, children, etc. is acceptable. The members of a class of beneficiaries capable of expansion or contraction will be treated as identifiable if it is possible to identify the class member with the shortest life expectancy.
a) The participant provides a copy of the trust instrument to the plan administrator and agrees that if the trust instrument is amended at any time in the future, he/she will, within a reasonable time, provide to the plan administrator a copy of each such amendment.
b) The participant provides the plan administrator with a list of all the beneficiaries of the trust (including contingent and remainder beneficiaries) along with a description of the conditions for their entitlement. He or she must certify that, to the best of his/her knowledge, the list is correct and complete and that the requirements of 1 a), b), c) and d) above are satisfied. In addition, the plan participant must agree to provide corrected certifications if an amendment changes any information previously certified. Finally, the participant agrees to provide a copy of the trust instrument to the plan administrator upon demand.
a) The trustee provides the plan administrator with a copy of the actual trust document for the trust that is named as a beneficiary of the participant under the qualified plan as of the date of death.
b) The trustee provides the plan administrator with a final list of all the beneficiaries of the trust as of October 31 of the year following the year the participant died (including contingent and remainder beneficiaries) along with a description of the conditions for their entitlement. The trustee must certify that, to the best of the trustees knowledge, the list is correct and complete and that the requirements of 1 a), b) and c) above are satisfied. In addition, the trustee agrees to provide a copy of the trust instrument to the plan administrator upon demand.
H. Calculation-DB: If a group of individuals are DBs, the person with the shortest life expectancy will be the Designated Beneficiary for purposes of selecting the life expectancy factor to use in MRD calculations. [§1.401(a)(9)-5, A-7(a)(1)] This person is sometimes referred to as the calculation-DB although that term does not appear in the Code or Regulations.
K. Spousal Rollover IRA: There are three methods by which a person that is a beneficiary of his or her deceased spouses qualified plan or IRA may reposition those assets into an individual retirement account and elect to treat the new account as his or her own. This is true regardless of when the participant dies. Throughout this document, that new account is referred to as a Spousal Rollover IRA  regardless of the steps taken to create it.
1. A surviving spouse beneficiary may create a spousal rollover IRA by simply assuming ownership of the deceased owners individual retirement account. It is important to note that this method is only available with IRAs, not other forms of qualified retirement plans. Furthermore, the surviving spouse must be the sole Designated Beneficiary of the entire account or a separate share and have the unlimited right to withdraw amounts from the IRA.
a) If an election is made to treat the account as the surviving spouse's own during the IRA owners year of death, the surviving spouse beneficiary may NOT assume ownership of the portion of the decedents account equal to the MRD for the current year that somehow failed to be distributed to the participant before death. [§1.408-8, A-5(a)] Instead, the spouse must withdraw the previously undistributed amount of the MRD and recognize its taxable portion on that years income tax return.
2. A surviving spouse beneficiary may create a spousal rollover IRA under §402(c)(9) by rolling over assets distributed to him or her from a qualified retirement plan such as a pension, profit sharing or stock bonus plan. Provided the surviving spouse subsequently elects to treat the new IRA as his or her own, the tax ramifications are identical to the explanation found in paragraph 3 immediately below. [§1.408-8, A-7] Please note, however, that a surviving spouse need not elect to treat the IRA as his or her own following the rollover of assets from a deceased participant's pension, profit sharing or stock bonus plan. In such a case, the surviving spouse remains the beneficiary of the Individual Retirement Account without assuming ownership. Hence, the IRA remains a beneficiary distribution account instead of becoming a spousal rollover IRA and required distributions must be determined under the postmortem guidelines when a spouse is beneficiary.
Can The Qualified Plan Limit Your Planning Options?
All the distribution planning in the world may be for naught if the plan document blocks the desired implementation. The tax rules and regulations previously cited are contingent, in many ways, on the provisions of the qualified plan. This means that a participants tax and estate planning preferences may not be available through the current trustee. Of course, a participant or Designated Beneficiary can execute a trustee-to-trustee transfer between IRAs and TSAs to obtain more flexible distribution options or a wider array of investment opportunities. Unfortunately, that remedy is not available to participants of pension, profit sharing or stock bonus plans unless they terminate their participation and roll over a lump sum distribution from the plan into an IRA. Of course, a surviving spouse named as beneficiary of any of those QRP's can work around the problem by using a spousal rollover IRA, but even that solution may interfere with the estate plan. Unlike a spouse who is named as a beneficiary, a non-spouse beneficiary of such plans is not allowed to roll over the QRP into an IRA in their own name. Starting in 2007, however, a non-spouse beneficiary of a pension, profit sharing or stock bonus plan may execute a trustee-to-trustee transfer of the QRP assets into an inherited IRA. The latter must be titled in the name of the deceased participant for the benefit of the same beneficiary and list that beneficiary's Social Security Account Number (SSAN) as the Taxpayer Identification Number (TIN) for the account. The same rules apply if a trust, rather than an individual, is the non-spouse beneficiary.
A. When a participant DIES BEFORE THE REQUIRED BEGINNING DATE, the applicability of the five-year rule and its two exceptions depends as much on the plans language as it does on the wishes of the beneficiary. (See the flow chart on Table 24 entitled Plan Restrictions Control Postmortem Distribution Options Before The Required Beginning Date) Please note that a qualified plan is allowed to effectively eliminate all the postmortem options available under the tax rules by requiring a complete distribution at some point before the deadline imposed by the Five-Year Rule. This could be a major blow to postmortem planning by the survivors unless a trustee-to-trustee transfer can be used to reposition the assets to a plan with more liberal provisions.
1. If the plan does not include a provision describing the method of distribution after the death of a participant, the final regulations specify that distributions MUST conform to the following rules.
a) Every beneficiary could be forced to withdraw under the provisions of the Five-Year Rule or before an earlier date.
b) A Surviving spouse might be allowed to use the General Exception or Spousal Exception while all others would be restricted to the Five-Year Rule or an earlier withdrawal deadline.
c) Non-spouse beneficiaries might be permitted to use the General Exception but a spouse would be limited to the Five-Year Rule or an earlier withdrawal deadline.
d) All beneficiaries could be required to use either the General Exception or the Spousal Exception depending on their relationship with the deceased participant. NOTE: This does not present a problem because a beneficiary may always accelerate withdrawals if he/she wants to rapidly drain the account.
(2) December 31 of the calendar year that contains the fifth anniversary of the participants death.
b) As of such date, the election must be irrevocable with respect to the beneficiary and all subsequent beneficiaries.
c) The election must apply to all subsequent years.
4. The final regulations provide a transition rule that will allow certain Designated Beneficiaries of participants that died before their Required Beginning Date to use the General Exception, even though the beneficiary failed to take the MRDs starting in the year following the year of the participants death. [§1.401(a)(9)-1, A-2(b)(2)] A thorough explanation of this point is available in Planning Pointer S.
1. Although having plan provisions that are more restrictive than the tax rules may appear to place a firm at a competitive disadvantage, corporate-sponsored retirement plans often use them to protect the plan from failing to make minimum required distributions and, hence, fall out of compliance. In a majority of instances, the offending provisions are so deeply imbedded in the plans disclosure documents that innocent participants hardly ever stumble onto them. Even knowledgeable practitioners can overlook these minute snags. It is possible that the more streamlined rules under the final regulations may bring forth a positive change, but the author has serious reservations that plan administrators will ever want to shoulder responsibility for fulfilling required distributions over fifty or sixty years to a participants grandchild.
2. On a more positive note, IRAs and §403(b) plans are usually quick to incorporate all the stretch-out provisions of the tax rules in order to encourage the retention of assets. In many cases, the final regulations allow longer tax-deferred accumulation by beneficiaries than under the original 1987 rules or even the 2001 proposed regulations. Do not be surprised if you soon hear IRA and §403(b) providers trumpeting the elongated stretch-out aspects of the final regulations. While it is true that the final regulations do impose an additional reporting requirement on IRA providers beginning in 2003, the extra burden will not be a deterrent. By the way, those reports will only be necessary during the lifetime of an IRA owner. Beneficiary distribution accounts are exempt.
3. The intertwining alternatives that deal with minimum required distributions following a participants post-RBD death seem to outnumber the freeways in Los Angeles. If not, they certainly match the twists and turns of the latter. Rather than attempt to describe those intricacies in outline format, it is far more effective for readers to view them on flow charts. Those charts, located on Tables 25A and 25B, provide a map that will help beneficiaries navigate though the maze. To effectively use the tables you must first know if the sole Designated Beneficiary is the participants spouse. If so, turn to Table 25A. In all other cases, begin by perusing Table 25B. The black tab near the top left corner of each table will also help guide you to the proper one. Once on the correct table, start at the oval identifying the facts and circumstances that match your case and then follow the arrows.
The text on the preceding pages provides a reasonable primer to use when beginning to explore the financial and estate planning implications of the minimum distribution rules under IRC §401(a)(9) and the final regulations published by the Internal Revenue Service on April 17, 2002. The "2002 Assorted Planning Pointers" listed below provide important reminders to individual participants, their beneficiaries and planning professionals. Further insights will soon be available on the web page entitled 2002 Practical Considerations. Once posted, that page will furnish a detailed explanation of Tables 26 through 29C.
Serious students need to go far beyond the limited areas addressed by the author. The final regulations provide a detailed map of the terrain that must be traversed. An excellent interpretation of the minute details on that map is available in the 7th edition 2011 of Life and Death Planning For Retirement Benefits by Natalie B. Choate, Esq. Ms. Choate has a tremendous depth of knowledge in this subject. Her telephone number in Boston is (617) 951-8817. Her web site is www.ataxplan.com. That site lists a number of valuable resources and provides updates to Ms. Choate's book. Another grand master of this subject is Noel C. Ice, Esq. in Fort Worth, Texas. His office telephone number is (817) 877-2885. His web site at www.trustsandestates.net is full of authoritative commentary on this and other subjects. Both Ms. Choate and Mr. Ice provide forms and sample language to assist members of the legal profession.
Practitioners looking for software are encouraged to contact Brentmark Software. Their telephone in Winter Park, Florida is (800) 879-6665. The companys web site is www.brentmark.com. At that site, you can download free demonstration software for the Retirement Distribution Planner as well as their Retirement Plan Analyzer. Those programs offer a viable means to deal with many routine situations.
The following planning pointers illustrate various required distribution issues encountered in typical circumstances. The author welcomes suggested additions.
F. Every case involving a participant that died before January 1, 2003 should be reviewed to make sure that MRDs for years 2003 and later are based on the life expectancy of the correct calculation-DB as well as the new single life expectancy table in the final regulations. For a further discussion of this very important point, please refer to the Redesignation/Reconstruction Rule in the Technical Terms section of the 2002 Rules of the Road.
G. Unlike a spouse who is named as beneficiary of a pension, profit sharing or stock bonus plan (QRP's), a non-spouse beneficiary of such plans is not allowed to roll over the QRP into an IRA in their own name, à la a spousal rollover IRA. Effective for distributions made after 2006, however, a non-spouse beneficiary of a pension, profit sharing or stock bonus plan may execute a trustee-to-trustee transfer of the QRP assets into an inherited IRA. The latter must be titled in the name of the deceased participant for the benefit of the same beneficiary and list that beneficiary's Social Security Account Number (SSAN) as the Taxpayer Identification Number (TIN) for the account. The same rules apply if a trust, rather than an individual, is the non-spouse beneficiary.
I. Letter Ruling 9237038 points out that an EXECUTOR for a surviving spouse that dies before making an election to treat the first deceased spouses IRA as his or her own IRA cannot make that election for the deceased surviving spouse. In other words, an executor for the second to die cannot carry out a spousal rollover if the surviving marriage partner fails to do so before his or her own death. Even under the more generous rules of the final regulations, this could result in the loss of valuable tax deferral. Had the rollover to the spousal IRA taken place, the surviving spouse would likely have specified the couples children as his or her own beneficiaries. Following the death of the surviving spouse, the beneficiaries of that spousal rollover IRA would be eligible to compute MRDs using the life expectancy of the oldest DB. Without a spousal rollover, the ultimate recipients of the account, most likely the couples children, will be forced to use the considerably shorter single life expectancy of the second deceased parent when computing required distributions. [§1.401(a)(9)-4, A-4(c) and §1.401(a)(9)-5, A-5] There is one possible remedy if the non-participant spouse beneficiary happens to die within nine months of the participant. Provided state law permits, the executor for the surviving spouse can disclaim that second decedents rights to the qualified plan benefits. Such action effectively returns control of the assets to the participants own beneficiary election form. If the couples children are listed as contingent beneficiaries on that form, the qualified plan assets will pass directly to them. As a minimum, the latter will also be able to use the oldest siblings life expectancy to stretch out required distributions.
J. The final regulations clearly establish the Services willingness to recognize disclaimers for purposes of required distributions under IRC §401(a)(9). [§1.401(a)(9)-4, A-4(a)] Hence, a primary beneficiary that executes a qualified disclaimer by the nine-month deadline following the participants death will not be considered a beneficiary when it comes time to determine DBs on the designation date. This technique creates a number of postmortem planning opportunities. Unfortunately, most beneficiary election forms provided by qualified retirement plans, IRAs and TSAs do not readily accommodate disclaimers if several individuals (children) are listed as primary beneficiaries. In the event one of the latter executes a qualified disclaimer, his or her share is usually divided among the other primary beneficiaries (siblings). This occurs even if the participant named contingent beneficiaries (grandchildren). In order to overcome this dilemma, planning professionals need to encourage 401(k) administrators, IRA custodians and TSA trustees to add language to their beneficiary forms that will allow participants to direct benefits to specific contingent beneficiaries if a particular primary beneficiary elects to disclaim his or her rights.
K. If a trust is to be used as a beneficiary for a qualified plan, do so only after a thorough review of the distribution rules and how they interact with the other estate planning needs. Pay special attention to the possibility that a trust may contain language that prevents it from qualifying under the Designated Beneficiary Rules. Finally, be sure to deliver a copy of the trust instrument, or the substitute documentation specified in §1.401(a)(9)-4, A-6 of the final regulations, in a timely manner to the plan administrator. For more details, peruse the Trust As Beneficiary discussion in the Technical Terms section of the 2002 Rules of the Road. Then be sure to review the language of §1.401(a)(9)-4, A-5 and A-6 in the final regulations. Lastly, be sure to peruse Chapter 6 in the 6th edition 2006 of Natalie Choate's Life and Death Planning for Retirement Benefits.
M. Although an irrevocable trust may be named as the beneficiary of a qualified plan, it is permissible to change to a new irrevocable trust as often as necessary to facilitate alterations in the estate plan.
O. If the rights to receive plan assets pass to a trust upon the death of a participant, the required distributions will eventually exceed the income earnings of the qualified plan. From then on, the trust will be forced to recognize the principal portion of the required distributions as taxable income to the trust. If the trust in turn passes out that principal to the income beneficiary to avoid a potential 35.0% Federal tax rate, the basic purpose of the trust may be compromised. Imagine the uproar that would emanate from the beneficiary of a remainder interest in a bypass or QTIP trust if the surviving spouse, in a second marriage situation, started receiving principal. If a trust needs to be the beneficiary for a qualified plan, be sure that the trust defines income and principal as the two words apply to distributions from a qualified plan. This last tip may also help overcome the artificial assumption built into many state uniform principal and income acts that limit income to a very small percentage (only 10% in California) of a required distribution from qualified plans.
Q. Following the death of a participant, a spouse or non-spouse DB may name a beneficiary of his/her own to receive the balance of the participant's account if the original DB dies before withdrawing all the funds. The beneficiary's action does not impact the required distribution calculations. For a prolonged period, many IRA custodians and trustees felt that only a surviving spouse was allowed to name a subsequent beneficiary. Fortunately, §1.401(a)(9)-4, A-4(c) and §1.401(a)(9)-5, A-7(c)(2) of the final regulations grant the same privilege to non-spouse DB's.
R. A surviving spouse that is the sole primary beneficiary of a decedents account may decide NOT to elect to treat the account as the spouse's own. In essence, the survivor maintains his or her status as beneficiary of the decedent's account. This is possible even if the surviving spouse rolls over the decedent's qualified retirement plan into an IRA or transfers the decedent's IRA directly to a new IRA. [§1.408-8, A-7] By remaining the beneficiary of the account, rather than becoming its owner, the survivor is permitted to postpone required distributions until the year the deceased participant would have attained age 70½. Using this Spousal Exception under §401(a)(9)(B)(iv) to delay mandatory withdrawals is often considered when the surviving spouse is younger than age 59½ because the 10% Federal excise tax on pre-59½ distributions will NOT apply if he or she taps the account. In contrast, the excise tax will apply to early withdrawals from a spousal rollover account. Unfortunately, a surviving spouse that has avoided the 10% excise tax on early distributions because of the exclusion under IRC §72(t)(2)(A)(ii) may lose the right to subsequently transfer the deceased participants qualified plan to a spousal rollover IRA of his/her own. (See LTRs 9418034 and 9608042 but be sure to contrast them with LTR 200110033.) Please keep in mind that when required distributions finally begin under IRC §401(a)(9)(B)(iv), minimum withdrawals must be computed using the surviving spouses single life expectancy on an attained age basis, rather than the more favorable values found on the Uniform Lifetime Table that would apply if the surviving spouse were to treat the account as his or her own. During the survivors lifetime, that differential could produce a significant disadvantage in the form of larger taxable distributions. [§1.401(a)(9)-5, A-5(c)(2)] The Spousal Exception is also detrimental if the survivor dies after commencement of required withdrawals. Under those circumstances, the final regulations force the ultimate beneficiaries (probably the couples children) to complete those required distributions based on the fixed-period single life expectancy of the surviving spouse established on his or her birthday in the year of death. [§1.401(a)(9)-5, A-5] That new rule effectively compels the children to greatly accelerate withdrawals and, hence, forego the tremendous stretch-out potential that would have been available to them as beneficiaries of an account that the surviving spouse elected to treat as his or her own.
S. The final regulations list the life expectancy rule as the default method when participants die before the RBD  provided there is a Designated Beneficiary. This change may prevent non-spouse DBs from being forced to adhere to the Five-Year Rule if they forget to withdraw the first required distribution by December 31 of the year after the participants death. Unfortunately, there is no escape from that quicksand if a qualified plan mandates the Five-Year Rule or uses it as its default in the event a beneficiary fails to make an election to the contrary. However, rescue is possible in cases where a plan stipulates that a non-spouse DB must use the General Exception to the Five-Year Rule, lists that exception as the plans default if the DB forgets to make an election to use it, or is silent as to what method must be followed if no election is made. In each of the latter three scenarios, the DB may escape from the clutches of the Five-Year Rule by switching to the General Exception under §401(a)(9)(B)(iii). To accomplish that change, any amounts that would have been required to be distributed under the General Exception for all distribution calendar years before 2004 must be distributed by the earlier of December 31, 2003 or the end of the fifth year following the year of the participants death. (See §1.401(a)(9)-3, A-4, §1.401(a)(9)-1, A-2(b)(2) and Table 24 on this web site.
T. If a participant wishes to name a minor as beneficiary of his or her qualified retirement plan (QRP), individual retirement account or §403(b) tax sheltered annuity (TSA) contract, difficulties often arise because state laws restrict the transfer of assets to anyone that has not yet attained a certain age. While a minor can be listed as a beneficiary, IRA custodians and plan administrators will not distribute assets directly to a minor. They will distribute assets to a court-appointed legal guardian of a minor or the custodian of an account established for a minor under the Uniform Transfers to Minors Act. In addition, IRA custodians and QRP administrators are happy to make postmortem distributions to the trustee of a trust for the benefit of a minor. While the options outlined in the two preceding sentences may appear to resolve the dilemma, each introduces its own list of complications and considerations that are beyond the scope of this Planning Pointer. Fortunately, an in-depth discussion of this topic is available in ¶6.3.12 of the 6th edition 2006 of Natalie Choate's Life and Death Planning for Retirement Benefits.
U. If a participant dies on or after his or her required beginning date, the required distribution for the year of death (YOD) must be taken on or before December 31 of that same year. The Code and Regulations do not provide a grace period for the participant's beneficiaries. That is to say, the beneficiaries need to withdraw the required distribution by the same deadline the participant would face if he or she were alive. The year-of-death's required distribution is computed as if the participant were alive throughout the entire year -- even if he or she died on January 1. If a participant withdrew a portion of the year's required distribution prior to dying sometime during that year, the beneficiaries must withdraw the remainder of the required distribution by year's end. Although the remainder of the required distribution belongs to the beneficiaries, it is includable in the decedent's estate and represents income in respect of a decedent (IRD). Note too that 100% of the YOD's required distribution must be taken before effecting a spousal rollover or trustee-to-trustee transfer of a qualified retirement plan by a non-spouse beneficiary to an inherited IRA.