(b) For purposes of applying the distribution rules in
section 401(a)(9),
section 403(b) contracts will be treated as individual retirement annuities described in
section 408(b) and individual retirement accounts described in
section 408(a) (IRAs). Consequently, except as otherwise provided in paragraph (c) of this A-1, the distribution rules in
section 401(a)(9) will be applied to
section 403(b) contracts in accordance with the provisions in
§ 1.408-8 for purposes of determining required minimum distributions for calendar years beginning on or after January 1, 2003.
(d) If an amount is distributed from the pre-'87 account balance and rolled over to another
section 403(b) contract, the amount will be treated as part of the post-'86 account balance in that second contract. However, if the pre-'87 account balance under a
section 403(b) contract is directly transferred to another
section 403(b) contract, the amount transferred retains its character as a pre-'87 account balance, provided the issuer of the transferee contract satisfies the recordkeeping requirements of paragraph (b) of this A-2.
(e) The distinction between the pre-'87 account balance and the post-'86 account balance provided for under this A-2 has no relevance for purposes of determining the portion of a distribution that is includible in income under
section 72.
Q-3. Must the pre-'87 account balance be distributed in accordance with the incidental benefit requirement?
A-3. Yes, the pre-'87 account balance must be distributed in accordance with the incidental benefit requirement of
§ 1.401-1(b)(1)(i). Distributions attributable to the pre-'87 account balance are treated as satisfying this requirement if all distributions from the
section 403(b) contract (including distributions attributable to the post-'86 account balance) satisfy the requirements of
§ 1.401-1(b)(1)(i) without regard to this section, and distributions attributable to the post-'86 account balance satisfy the rules of this section. Alternatively, distributions attributable to the pre-'87 account balance are treated as satisfying the incidental benefit requirement if all distributions from the
section 403(b) contract (including distributions attributable to both the pre-'87 account balance and the post-'86 account balance) satisfy the rules of this section.
A-4. Yes, as provided in paragraph (b) of A-1 of this section, the distribution rules in
section 401(a)(9) will be applied to
section 403(b) contracts in accordance with the provisions in
§ 1.408-8. Thus, the required minimum distribution must be separately determined for each
section 403(b) contract of an employee. However, as provided in A-9 of
§ 1.408-8 with respect to IRAs, such amounts may then be totaled and the total distribution taken from any one or more of the individual
section 403(b) contracts. However, consistent with the rules in A-9 of
§ 1.408-8, only amounts in
section 403(b) contracts that an individual holds as an employee may be aggregated. Amounts in
section 403(b) contracts that an individual holds as a beneficiary of the same decedent may be aggregated, but such amounts may not be aggregated with amounts held in
section 403(b) contracts that the individual holds as the employee or as the beneficiary of another decedent. Distributions from
section 403(b) contracts or accounts will not satisfy the minimum distribution requirements for IRAs, nor will distributions from IRAs satisfy the minimum distribution requirements for
section 403(b) contracts or accounts.