New IRS Final RMD Rules and Proposed Regulations to Address Additional SECURE 2.0 Act Issues

Description

On July 18, 2024, the IRS finalized regulations governing RMDs to reflect changes made by the SECURE Acts. Counsel assisting plan sponsors and administrators must recognize key issues stemming from these final regulations and ensure compliance for qualified plans, IRAs, tax-deferred annuities, and 457(b) plans.

The final regulations include certain revisions that reflect the changes implemented in SECURE 2.0 Act, including increasing the age for required beginning dates, exempting Roth accounts from lifetime distributions, reducing RMD excise taxes, and expanding lifetime income availability; and providing clarification on non-eligible designated beneficiaries who are subject to both the 10-year rule and the "at least as rapidly" rule along with other critical provisions.

The new proposed regulations focus on addressing additional RMD issues under the SECURE 2.0 Act, such as (1) the special spousal election; (2) calculation of the partial annuity aggregation rule; (3) distributions from designated Roth accounts not subject to lifetime RMD payments; (4) treatment of corrective distributions of missed RMD payments; and (5) distributions to trust beneficiaries.

Any failure to take an RMD carries stiff penalties: a 50 percent excise tax was imposed for missed RMDs in years 2022 and prior. From 2023 onward, the excise tax is reduced to 25 percent on insufficient or late RMD withdrawals, and it is further lowered to 10 percent if the RMD is corrected timely. Understanding when distributions must be made is critical for those participating in these plans.

Listen as our panel discusses key components of the final and proposed regulations and changes made to retirement account distributions and RMDs by the SECURE Acts. The panel will also offer techniques for rectifying missed RMDs and relevant administrative considerations.