The IRS has made available Notice 2016-39 and Revenue Procedure 2016-39, both of which deal with retirement plans.

Notice 2016-39 provides guidance as to whether payments received by an employee from a qualified retirement plan during phased retirement are amounts received as an annuity under section 72 of the Internal Revenue Code.

Revenue Procedure 2016-36 provides that Notice 2016-39, recovery of investment in the contract from payments received from a retirement plan by an employee during phased retirement, does not apply to amounts that are received from a non-qualified contract.  The revenue procedure concludes that in applying the § 72 regulations cited in the Notice to a non-qualified contract, the possibility of further contributions to the contract or a subsequent election under the contract to receive the benefit payable under the contract in a different manner generally will not affect the determination of whether distributions are amounts received as an annuity.

Click here to access the documents: Notice 2016-39 and Revenue Procedure 2016-36

Posted by Allison Trupp, Associate Editor, Wealth Strategies Journal