- 15 -
Section 402(a)(1), as amended by section 314(c)(1) of the
Economic Recovery Tax Act of 1981 (ERTA), Pub. L. 97-34, 95 Stat.
172, 286, provides that a distributee is taxed on benefits under
a qualified retirement plan in the tax year in which those
benefits are "actually distributed". Prior to the 1981
amendment, section 402(a)(1) provided that amounts held in an
employees' trust were taxable "when actually paid, distributed,
or when made available to the distributee."6 The phrase "when
made available" was deleted by ERTA section 314(c)(1) in order to
alleviate a significant administrative burden for qualified plans
which had undertaken to protect employees from taxation under
section 402(a)(1) by developing a complex array of restrictions
on an employee's right to make withdrawals from a qualified plan.
Staff of Joint Comm. on Taxation, General Explanation of the
Economic Recovery Tax Act of 1981, at 214 (J. Comm. Print 1981);
see Clayton v. United States, 33 Fed. Cl. 628, 636 (1995) ("prior
6 Sec. 1.402(a)-1(a)(5), Income Tax Regs., which has not
been amended to reflect the 1981 change, states: "If pension or
annuity payments or other benefits are paid or made available to
the beneficiary of a deceased employee or a deceased retired
employee by a trust described in section 401(a) which is exempt
under section 501(a), such amounts are taxable in accordance with
the rules of section 402(a) and this section." Sec. 1.402(a)-
1(a)(6)(i), Income Tax Regs., which has also not been amended to
reflect the 1981 change, states: "The total distributions
payable are includible in the gross income of the distributee
within one taxable year if they are made available to such
distributee and the distributee fails to make a timely election
under section 72(h) to receive an annuity in lieu of such total
distributions."
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011