The IRS recently issued proposed regulations (REG-105954-20) to reflect changes made to required minimum distribution (RMD) rules by the Setting Every Community Up for Retirement Enhancement (SECURE) Act, enacted on Dec. 20, 2019. The proposed regulations also clarify certain issues raised over the years in public comments and private letter ruling requests regarding the RMD rules.
The RMD rules generally require distributions from qualified retirement plans (Section 401(k) plans, Section 403(b) plans, individual retirement accounts (IRAs) and eligible Section 457(b) plans) after a taxpayer reaches a specific age and after death. The rules set forth a required beginning date (RBD) for distributions and identify the period over which the employee’s entire interest must be distributed.
The SECURE Act made two significant changes to the preexisting RMD rules:
- Increasing the RBD age threshold from age 70-1/2 to age 72, effective for participants attaining age 70-1/2 after 2019
- Replacing the five-year rule for participants who die before their RBD with a new 10-year rule that applies for all post-death distributions except for certain eligible designated beneficiaries (e.g., surviving spouses), effective for deaths occurring after 2019
The regulations generally are proposed to apply for purposes of determining RMDs for calendar years beginning on or after Jan. 1, 2022. The IRS also indicated that for the 2021 distribution calendar year, taxpayers must apply the existing regulations—but additionally consider a reasonable, good-faith interpretation of the amendments made by the SECURE Act. Compliance with the proposed regulations would be considered a reasonable, good-faith interpretation of the changes.
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