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The Internal Revenue Service issued guidance Feb. 22 in Revenue Ruling 2011-7 to clarify how plans can apply tax code Section 403(b) rules for terminating tax-sheltered annuity plans. IRS said in the ruling that Section 403(b) annuity plans are permitted to contain provisions for terminating the plan and for distributing accumulated benefits when the plan is terminated. The question of whether and how retirement plans funded with individual annuity contracts and individually owned custodial accounts could ever be terminated is one that practitioners have been asking IRS to clarify. Treasury Regulations Section 1.403(b)-10(a) finalized in 2007 generally permit employers to amend their Section 403(b) plans to eliminate future contributions for existing participants or to limit participation to existing participants and employees, IRS said.
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