The Department of the Treasury and the Internal Revenue Service have adopted regulations formalizing a “reasonable good faith” standard for required minimum distributions (RMDs) from governmental 401(a)/414(d), 403(b) and 457(b) plans. These regulations implement a provision of the Pension Protection Act of 2006 dictating that change. The final regulations also eliminate as superfluous two special RMD rules for governmental plans included in the 2004 RMD regulations:
- The grandfather rule preserving annuity distribution options provided under the terms of a governmental plan as in effect on April 17, 2002, that satisfy a reasonable, good faith interpretation of the RMD rules [Treas. Reg. § 1.401(a)(9)-6, Q&A-16]; and
- For governmental defined benefit and annuity plans, the separate reasonable good faith rule that expired on the later of December 31, 2005, or 90 days after the opening of the first legislative session of the legislative body with the authority to amend the plan that began on or after June 15, 2004 [Treas. Reg. § 1.401(a)(9)-6, Q&A-17].
The final regulations are effective for all years for which the RMD rules apply.