The IRS has just issued very lengthy final regulations (TD 10001; RIN:1545-BP82) governing required minimum distributions (RMDs) that reflect changes made by the SECURE Act and the SECURE 2.0 Act. The final regulations generally follow the proposed regulations, although some changes were made as a result of comments that were received. These changes impact qualified retirement plans, such as 401(k) plans, 403(b) plans, and eligible 457(b) plans and their participants and beneficiaries, as well as IRA owners and their beneficiaries, and are applicable for distribution calendar years beginning on January 1, 2025. As a result, all affected plans will need to operate in compliance with these new final regulations starting in 2025, although plan documents will not need to be amended until later.
Consistent with the proposed regulations, the final regulations confirm that in the case of beneficiaries other than surviving spouses, disabled persons, or persons less than 10 years younger than the participant (“ineligible beneficiaries”), if a participant dies after RMDs have commenced, distributions must be made at least as rapidly as they were made to the participant and any remaining amount must also be forced out at the end of 10 years. However, in the case of a participant who died before their required beginning date, distributions do not have to be made annually and can be pushed out and paid in a lump sum at the end of the 10-year period. Eligible beneficiaries (surviving spouse etc.) have more flexibility and can use a life expectancy rule.
The IRS also released a notice of proposed rulemaking and notice of public hearing (REG-103529-23, RIN: 1545-BQ66) that discusses further amendments. In the meantime, the transition relief previously afforded for 2024 and earlier years remains in place: Notice 2024-35, Certain Required Minimum Distributions for 2024 (irs.gov).
Of course, “the devil is in the details,” and final regulations provide a lot more detailed information, so stay tuned. We will cover those in future communications. To discuss how the new regulations might affect your plan, please request a consultation with a member of our team.
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