Example. A defined benefit plan (Plan X) provides monthly annuity payments of $500 for the life of unmarried participants with a 10-year period certain. An unmarried, retired participant (A) in Plan X attains age 701/2 in 2005. In order to meet the requirements of this paragraph, the first monthly payment of $500 must be made on behalf of A on or before April 1, 2006, and the payments must continue to be made in monthly payments of $500 thereafter for the life and 10-year period certain.
Adjusted employee/beneficiary age difference | Applicable percentage |
10 years or less | 100 |
11 | 96 |
12 | 93 |
13 | 90 |
14 | 87 |
15 | 84 |
16 | 82 |
17 | 79 |
18 | 77 |
19 | 75 |
20 | 73 |
21 | 72 |
22 | 70 |
23 | 68 |
24 | 67 |
25 | 66 |
26 | 64 |
27 | 63 |
28 | 62 |
29 | 61 |
30 | 60 |
31 | 59 |
32 | 59 |
33 | 58 |
34 | 57 |
35 | 56 |
36 | 56 |
37 | 55 |
38 | 55 |
39 | 54 |
40 | 54 |
41 | 53 |
42 | 53 |
43 | 53 |
44 and greater | 52 |
Example. Distributions commence on January 1, 2003 to an employee (Z), born March 1, 1937, after retirement at age 65. Z's daughter (Y), born February 5, 1967, is Z's beneficiary. The distributions are in the form of a joint and survivor annuity for the lives of Z and Y with payments of $500 a month to Z and upon Z's death of $500 a month to Y, i.e., the projected monthly payment to Y is 100 percent of the monthly amount payable to Z. Accordingly, under A-10 of this section, compliance with the rules of this section is determined as of the annuity starting date. The adjusted employee/beneficiary age difference is calculated by taking the excess of the employee's age over the beneficiary's age and subtracting the number of years the employee is younger than age 70. In this case, Z is 30 years older than Y and is commencing benefit 4 years before attaining age 70 so the adjusted employee-beneficiary age difference is 26 years. Under the table in the paragraph (c)(2) of this A-2, the applicable percentage for a 26-year adjusted employee/beneficiary age difference is 64 percent. As of January 1, 2003 (the annuity starting date) the plan does not satisfy the MDIB requirement because, as of such date, the distribution option provides that, as of Z's required beginning date, the monthly payment to Y upon Z's death will exceed 66 percent of Z's monthly payment.
Year | Death benefit during year | End-of-year notional account before withdrawal | Average notional account | Withdrawal at end of year | End-of-year notional account after withdrawal |
2008 | $1,000,000 | $550,000 | |||
2009 | 1 950,739 | 2 $561,000 | 3 $555,500 | 4 $28,205 | 532,795 |
2010 | 901,983 | 543,451 | 538,123 | 28,492 | 514,959 |
2011 | 853,749 | 525,258 | 520,109 | 28,769 | 496,490 |
2012 | 806,053 | 506,419 | 501,454 | 29,034 | 477,385 |
2013 | 758,916 | 486,933 | 482,159 | 29,287 | 457,645 |
2014 | 712,356 | 466,798 | 462,222 | 29,525 | 437,273 |
1 $1,000,000 death benefit reduced 4.93 percent for withdrawal during 2008.
2 Notional account value at end of prior year (after distribution) increased by 2 percent return for year.
3 Average of $550,000 notional account value at end of prior year (after distribution) and $561,000 notional account value at end of current year (before distribution).
4 December 31, 2008 notional account (before distribution) divided by uniform lifetime table age 79 factor of 19.5.
Year | Survivorship to start of year | Interest discount to end of 2008 | Mortality rate during year | Discounted additional benefits within year |
2008 | ||||
2009 | 1.00000 | .97590 | 5 .04426 | 17,070 |
2010 | .95574 | 6 .92943 | .04946 | 7 15,987 |
2011 | 8 .90847 | .88517 | .05519 | 14,807 |
2012 | .85833 | .84302 | .06146 | 13,546 |
2013 | .80558 | .80288 | .06788 | 12,150 |
2014 | .75090 | .76464 | .07477 | 10,739 |
$84,300 |
5 One-quarter age 78 rate plus three-quarters age 79 rate.
6 Five percent discounted 18 months (1.05 + (-1.5)).
7 Blended age 79/age 80 mortality rate (.04946) multiplied by the $363,860 excess of death benefit over the average notional account value (901,983 less 538,123) multiplied by .95574 probability of survivorship to the start of 2010 multiplied by 18 month interest discount of .92943.
8 Survivorship to start of preceding year (.95574) multiplied by probability of survivorship during prior year (1-.04946).
Year | Death benefit during year | End-of-year notional account before withdrawal | Average notional account | Withdrawal at end of year | End-of-year notional account after withdrawal |
2008 | $1,000,000 | $450,000 | |||
2009 | 950,739 | $459,000 | $454,500 | $23,077 | 435,923 |
2010 | 901,983 | 444,642 | 440,282 | 23,311 | 421,330 |
2011 | 853,749 | 429,757 | 425,543 | 23,538 | 406,219 |
2012 | 806,053 | 414,343 | 410,281 | 23,755 | 390,588 |
2013 | 758,916 | 398,399 | 394,494 | 23,962 | 374,437 |
2014 | 712,356 | 381,926 | 378,181 | 24,157 | 357,768 |
Year | Survivorship to start of year | Interest discount to end of 2008 | Mortality rate during year | Discounted additional benefits within year |
2008 | ||||
2009 | 1.00000 | .97590 | .04426 | $21,432 |
2010 | .95574 | .92943 | .04946 | 20,286 |
2011 | .90847 | .88517 | .05519 | 19,004 |
2012 | .85833 | .84302 | .06146 | 17,601 |
2013 | .80558 | .80288 | .06788 | 15,999 |
2014 | .75090 | .76464 | .07477 | 14,347 |
$108,669 |
Age at final payment | Factor |
79 | 10.5 |
80 | 10.0 |
81 | 9.5 |
82 | 9.0 |
83 | 8.5 |
84 | 8.0 |
Q-15: Are there special rules applicable to payments made under a defined benefit plan or annuity contract to a surviving child?
A-15: Yes, pursuant to section 401(a)(9)(F), payments under a defined benefit plan or annuity contract that are made to an employee's child until such child reaches the age of majority (or dies, if earlier) may be treated, for purposes of section 401(a)(9), as if such payments were made to the surviving spouse to the extent they become payable to the surviving spouse upon cessation of the payments to the child. For purposes of the preceding sentence, a child may be treated as having not reached the age of majority if the child has not completed a specified course of education and is under the age of 26. In addition, a child who is disabled within the meaning of section 72(m)(7) when the child reaches the age of majority may be treated as having not reached the age of majority so long as the child continues to be disabled. Thus, when payments described in this paragraph A-15 become payable to the surviving spouse because the child attains the age of majority, recovers from a disabling illness, dies, or completes a specified course of education, there is not an increase in benefits under A-1 of this section. Likewise, the age of child receiving such payments is not taken into consideration for purposes of the minimum incidental benefit requirement of A-2 of this section.
Q-16: What are the rules for determining required minimum distributions for defined benefit plans and annuity contracts for calendar years 2003, 2004, and 2005?
A-16: A distribution from a defined benefit plan or annuity contract for calendar years 2003, 2004, and 2005 will not fail to satisfy section 401(a)(9) merely because the payments do not satisfy A-1 through A-15 of this section, provided the payments satisfy section 401(a)(9) based on a reasonable and good faith interpretation of the provisions of section 401(a)(9).
Adjusted employee/beneficiary age difference | Applicable percentage |
2 years or less | 100 |
3 | 88 |
4 | 78 |
5 | 70 |
6 | 63 |
7 | 57 |
8 | 52 |
9 | 48 |
10 | 44 |
11 | 41 |
12 | 38 |
13 | 36 |
14 | 34 |
15 | 32 |
16 | 30 |
17 | 28 |
18 | 27 |
19 | 26 |
20 | 25 |
21 | 24 |
22 | 23 |
23 | 22 |
24 | 21 |
25 and greater | 20 |
26 C.F.R. §1.401(a)(9)-6