For advisors, the most helpful piece of guidance may well be
found in Notice 2014-54, “Guidance on Allocation of After-Tax Amounts to
Rollovers,” which provides rules for allocating pretax and after-tax amounts
among disbursements that are made to multiple destinations from a 401(a) plans
(including 401(k), 403(b) and 457(b) plans).
The notice provides four different examples of how the
rules apply. While they generally apply to distributions made on or after Jan.
1, 2015, the rules also allow for “a reasonable interpretation of the last
sentence of §402(c)(2) to allocate after-tax and pretax amounts among
disbursements made to multiple destinations” for distributions made on or after
Sept. 18, 2014.
Separately, the IRS released proposed rules 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
The IRS also issued its much-anticipated final
regulations on hybrid retirement plans, including cash balance plans, on
Sept. 18. In a 111-page document, the final regulations provide guidance on
issues left unaddressed by the last set of rules on hybrid plans issued in
Also included were proposed regulations on hybrid
plans that would allow DB 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 regulations without violating the anti-cutback rules
of Code Section 411(d)(6).
A hearing has been scheduled for Jan. 9, 2015 on the
proposed rules on hybrid plans.
here to access the full article on NAPA Net.