RMD Final Regulations Issued

The Department of the Treasury and the Internal Revenue Service issued final regulations updating the required minimum distribution (RMD) rules. The final regulations reflect changes made by the SECURE Act and the SECURE 2.0 Act impacting retirement plan participants, IRA owners and their beneficiaries. While certain changes were made in response to comments received on the proposal, the final regulations generally follow the original plan. 

Read more in The Gold Book under Mandatory Distributions.

What's New? Final RMD Rules Effective 1/1/25

On July 18, 2024, the IRS released final regulations updating the required minimum distribution (RMD) rules for retirement plans. The final regulations, which reflect certain changes made by the SECURE Act and the SECURE 2.0 Act, largely follow proposed regulations issued in 2022 (the 2022 proposed regulations). The final regulations are effective January 1, 2025. Read more in The Gold Book under Mandatory Distributions. 

What's New? 2024 Cost of Living Adjustments

The Internal Revenue Service announcd cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2024. For details see:

Cost of Living Adjustments for Pension Plans

Traditional IRA Deductions

Roth IRA Contribution Limitations

What's New? New 401(k) Catch-Up Contribution Rules for 2024

The SECURE 2.0 Act substantially changed retirement account rules. Some of these changes have already taken effect and have caused confusion. That’s been problematic for some older adults who need clarity on crucial retirement planning aspects, such as when to take required minimum distributions (RMDs).

Another concern is the upcoming changes to the rules governing catch-up contributions for 401(k) plans. These changes, which won’t be effective until 2024, will require catch-up contributions for higher-income earners to be made on a Roth basis. Read more HERE in The Gold Book. 

What's New: IRA Changes for 2023 and Beyond

On December 29, 2022, the Consolidated Appropriations Act of 2023 (HR 2617) was signed into law. The Act includes important provisions affecting retirement savings plans which are intended to build upon the 2019 SECURE Act. These provisions, collectively referred to as SECURE 2.0, offer many new benefits to employers and employees which are designed to make it more attractive for employers to offer retirement plans and to improve retirement outcomes for employees.

The topics below are linked to updated sections of The Gold Book: 

RMD age increased to 73

RMD Penalty Reduced

Expanded Penalty Exceptions

Qualified Charitable Distribution Expansion

529 Rollovers to Roth IRAs

QLAC Premium Increases

Savers Credit Replaced by Savers Match

Proposed regulations update RMDs for SECURE Act changes

The IRS and Treasury released proposed regulations (REG-105954-20) that would update existing rules for required minimum distributions (RMDs) from qualified retirement plans.

Enacted in December 2019, the Setting Every Community Up for Retirement Enhancement (SECURE) Act 

revised the starting date for required minimum distributions (RMDs) from a qualified plan, generally to April 1 of the calendar year following the later of the calendar year in which the employee either turns age 72 or retires (Sec. 401(a)(9)(C)). Before the SECURE Act's amendment, that age was 70½. The higher age was effective for distributions required to be made after Dec. 31, 2019 (with respect to individuals who turned age 70½ after that date) (SECURE Act Section 114(a)).

Also, the SECURE Act eliminated "stretch" individual retirement accounts (IRAs) or plan distributions by requiring distributions to nonspouse beneficiaries (other than eligible designated beneficiaries) to be completed within 10 years following a plan participant or IRA owner's death (the 10-year rule) rather than, as before, over the beneficiary's life or life expectancy. The SECURE Act defined eligible designated beneficiaries for purposes of the exception to the 10-year rule as the employee's surviving spouse, the employee's child under the age of majority, a disabled designated beneficiary, a chronically ill individual, or other individual no more than 10 years younger than the employee (Sec. 401(a)(9)(E)(i)).

The proposed regulations provide general rules for RMDs, including application of the 10-year rule where the retirement plan owner dies, then the designated beneficiary also dies. If the owner died before Sec. 401(a)(9)(H)'s effective date for the plan and the owner had only one designated beneficiary who also died before that effective date, the beneficiary of the designated beneficiary is subject to the 10-year rule. If the owner's designated beneficiary died on or after that effective date, the 10-year rule does not apply to the beneficiary of the designated beneficiary. If the owner dying before the Sec. 401(a)(9)(H) effective date for the plan had more than one designated beneficiary, whether the SECURE Act amendments apply depends on when the oldest beneficiary dies.

The proposed regulations also address the SECURE Act RMD starting age of beneficiaries of an owner who died before reaching age 70½ but would have reached that age on or after Jan. 1, 2020. In that case, the beneficiary may wait until the calendar year in which the employee would have reached age 72 to begin RMDs.

The proposed regulations clarify the eligible designation beneficiary definition, age of majority, applicability of disability to young beneficiaries, and more. The proposed regulations would generally apply for purposes of determining RMDs for calendar years beginning on or after Jan. 1, 2022, or to distributions on or after that date. For the 2021 distribution calendar year, taxpayers must apply the existing regulations but take into account a reasonable, good-faith interpretation of the SECURE Act amendments, which compliance with the proposed regulations will satisfy.

What's New? Updated Life Expectancy Tables for IRA Distributions

The IRS has released new life expectancy tables for calculating required minimum distributions (RMDs). The most commonly used tables are the Uniform Lifetime and the Single Life Expectancy Tables.  The Uniform Lifetime Table is used by most IRA owners who need to take 2022 lifetime RMDs. The Single Life Expectancy Table is used by IRA beneficiaries who must take an annual RMD for 2022. 

For details on the new tables and where to find them, see the Pension section on Mandatory Distributions in The Gold Book.

2020 RMD Waiver Reminder

RMDs Waived for 2020

The CARES Act waives required minimum distributions (RMDs) during 2020 for IRAs and defined contribution retirement plans. RMDs are also waived for beneficiaries with inherited IRAs and accounts inherited in a retirement plan. 

Distributions of an amount that would have been an RMD in 2020 can generally be rolled over to another workplace retirement plan or IRA within 60 days of the distribution. RMDs rolled over by August 31, 2020, have special relief.

RMD rolled over by August 31, 2020: Notice 2020-51 [PDF] provides that if a distribution from an IRA of an amount that would have been an RMD in 2020 was made between January 1, 2020, and July 2, 2020, then the distribution can be rolled over by August 31, 2020. If a 2020 RMD was distributed after July 2, 2020, then the distribution must be rolled over within 60 days of the distribution. A 2020 RMD that’s part of a series of substantially equal periodic payments does not prevent it from being eligible for rollover.

Additionally, if a 2020 RMD was distributed before August 31, 2020, but was repaid to the distributing IRA by August 31, 2020:

• The repayment is not subject to the one rollover per 12-month period limitation.
• An RMD from an inherited IRA can be repaid to the distributing IRA.

Inherited IRAs: Distributions from inherited IRAs are not required in 2020. For deaths prior to 2020, beneficiaries are required to take distributions using the 5-year rule or yearly distributions over their life expectancy. The 5-year rule requires the inherited IRA to be distributed within 5 years following the year of the account holder’s death. 2020 does not count toward the 5 years. A taxpayer would essentially have six years, instead of five, to distribute the inherited IRA if the account holder died before 2020.

Taxpayers taking distributions using the lifetime distribution option available for deaths prior to 2020, are not required to take a distribution in 2020. For an account holder who died in 2019, normally they would be required to begin taking distributions from the inherited IRA by the end of the following year, 2020, to take advantage of the lifetime distribution option. Since 2020 does not count, they have until the end of 2021 to begin taking distributions over their lifetime.

Tax treatment of 2020 RMDs that are not rolled over: RMDs in 2020 that are not rolled over or repaid may be eligible to be treated as coronavirus-related distributions for a qualified individual. A 2020 RMD that otherwise qualifies as a coronavirus-related distribution may be repaid over a 3-year period or have the taxes due on the distribution spread over three years. 

Special note for inherited IRAs: If a withdrawal from an inherited IRA qualifies as a coronavirus-related distribution, income from the withdrawal may be spread over three years for income inclusion. However, the withdrawal may not be repaid to the inherited IRA. 

Substantially equal periodic payments are not waived. If a taxpayer is using substantially equal periodic payments to meet one of the exceptions to the 10% additional tax on distributions prior to age 59 ½, they are still required to take the periodic payment in 2020. If the periodic payment is not taken in 2020, the exception is lost and those withdrawals taken in prior years will become subject to the 10% additional tax.

What's New? Plan Loans Under the CARES Act

The Internal Revenue Service today released Notice 2020-50 (PDF) to help retirement plan participants affected by the COVID-19 coronavirus take advantage of the CARES Act provisions providing enhanced access to plan distributions and plan loans. This includes expanding the categories of individuals eligible for these types of distributions and loans (referred to as "qualified individuals") and providing helpful guidance and examples on how qualified individuals will reflect the tax treatment of these distributions and loans on their federal income tax filings.

Read more about Plan Loans in The Gold Book.

What's New? RMD Rollover Relief Under CARES Act

The Internal Revenue Service announced that anyone who already took a required minimum distribution (RMD) in 2020 from certain retirement accounts now has the opportunity to roll those funds back into a retirement account following the CARES Act RMD waiver for 2020.

The 60-day rollover period for any RMDs already taken this year has been extended to August 31, 2020, to give taxpayers time to take advantage of this opportunity.

The IRS described this change in Notice 2020-51 (PDF), released today. The Notice also answers questions regarding the waiver of RMDs for 2020 under the Coronavirus Aid, Relief, and Economic Security Act, known as the CARES Act.

The CARES Act enabled any taxpayer with an RMD due in 2020 from a defined-contribution retirement plan, including a 401(k) or 403(b) plan, or an IRA, to skip those RMDs this year. This includes anyone who turned age 70 1/2 in 2019 and would have had to take the first RMD by April 1, 2020. This waiver does not apply to defined-benefit plans.

In addition to the rollover opportunity, an IRA owner or beneficiary who has already received a distribution from an IRA of an amount that would have been an RMD in 2020 can repay the distribution to the IRA by August 31, 2020. The notice provides that this repayment is not subject to the one rollover per 12-month period limitation and the restriction on rollovers for inherited IRAs.

The notice provides two sample amendments that employers may adopt to give plan participants and beneficiaries whose RMDs are waived a choice as to whether or not to receive the waived RMD.

IRS Postponement of Deadlines

IRS Forms 5498 reporting deadlines are postponed to August 31, 2020. 

The deadlines applicable to any of the following acts that would have fallen on or after April 1, 2020 and before July 15, 2020 have been postponed until July 15, 2020:

• Simplified Employee Pension (SEP) and Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) plan contributions
• Indirect rollovers from employer sponsored retirement plans to IRAs
• 2019 traditional IRA, Roth IRA, and HSA regular contributions -(from previous guidance)
• 2019 CESA regular contributions
• Rollovers between IRAs, between HSAs, and between CESAs
• 120-day rollover period for first-time home buyers
• Repayment of a Qualified Reservist Distribution
• Deadline to remove excess or unwanted IRA contributions

Extention of 5498 Filing Deadline

On May 28, 2020, the IRS issued Notice 2020-35, which further postpones, to August 31, 2020, the due date for filing with the IRS and furnishing to account holders Form 5498, IRA Contribution Information, Form 5498-ESA, Coverdell ESA Contribution Information, and Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information. Previously, on April 10, 2020, the IRS issued Notice 2020-23, which provided guidance that extended from June 1 to July 15 the deadline for filing and furnishing IRS Forms 5498 and 5498-SA.

IRS: Withholding on certain periodic retirement and annuity payments

In Notice 2020-3, the IRS provided that, for 2020 the default rate of withholding on periodic payments will continue to be based on treating the taxpayer as a married individual claiming three withholding allowances when no withholding certificate is in effect.

What's New? 2019 Tax Filing Deadline Extended

The federal income tax filing due date is extended from April 15, 2020 to July 15, 2020. 

This extension results from President’s natural emergency declaration as a result of the COVID-19 virus. Taxpayers do not need to file any additional forms or call the IRS to qualify for this automatic federal tax filing and payment relief.  

Since contributions to an IRA must be made by the annual tax filing due date, the contribution deadline is also July 15, 2020.

What's New? Cost of Living Adjustments

The Internal Revenue Service announcd cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2020. For details see:

Cost of Living Adjustments for Pension Plans

Traditional IRA Deductions

Roth IRA Contribution Limitations

What's New? SECURE Act Makes Significant Changes to Retirement Accounts

The SECURE Act (Setting Every Community Up for Retirement Enhancement) became effective January 1, 2020 and makes sweeping changes to Retirement Accounts.

Important highlights include:

• Age Limit Eliminated for Traditional IRA Contributions

Beginning in 2020, the new law eliminates the age limit for traditional IRA contributions (formerly 70 ½). Now, those who are still working can continue to contribute to a traditional IRA, regardless of their age. See Eligibility in The Gold Book.

• RMD Age Raised to 72

The SECURE Act also raises the age for beginning RMDs to 72 for all retirement accounts subject to RMDs. IRA owners reaching age 70 ½ in 2020 catch a break and will not have to take their first RMD in 2020 now that the RMD deadline has been extended to age 72. See Mandatory Distributions and When Benefits Must Begin in The Gold Book.

• New Exception to the 10% Penalty for Birth or Adoption

The SECURE Act adds a new 10% penalty exception for birth or adoption. It is limited to $5,000 per individual over a lifetime. The birth or adoption distribution amount can be repaid at any future time (re-contributed back to any retirement account). See IRS Penalty Exceptions and Withdrawals Prior to Age 59-1/2 in The Gold Book.

• Elimination of "Stretch" IRA

Beginning for deaths after December 31, 2019, the stretch IRA is replaced with a ten year rule for the vast majority of beneficiaries. The rule requires accounts to be emptied by the end of the tenth year following the year of death. There are no annual RMDs. Instead, the only RMD on an inherited IRA is the balance at the end of the 10 years after death. For deaths in 2019 or prior years, the old rules would remain in place.

There are five classes of “eligible designated beneficiaries” who are exempt from the 10-year post-death payout rule and can still stretch RMDs over life expectancy. These include surviving spouses, minor children, disabled individuals, the chronically ill, and beneficiaries not more than ten years younger than the IRA owner.

See Accounts of Deceased IRA Holders and When Benefits Must Begin in The Gold Book.

Updated Life Expectancy Tables

The IRS has issued proposed regulations revising the life expectancy and distribution period tables used for determining required minimum distributions (RMDs) from qualified retirement plans, individual retirement accounts (IRAs), annuities, and other tax-favored employer-provided retirement arrangements. The proposed regulations would affect participants, beneficiaries, and plan administrators of qualified retirement plans and other retirement arrangements, as well as owners, beneficiaries, trustees, and custodians of IRAs and annuities. The updated tables generally are proposed to be applicable for distribution calendar years beginning on or after January 1, 2021.

Plan Amendments

Amendments for any required modifications are not required to be incorporated into the plan document until IRS guidance is published. It is expected that such amendments will be issued to be effective with plan year 2022. At that time, the IRS will provide the date by which amendments must be adopted. See The SECURE Act in The Gold Book.

What's New? 401(k) Hardship Distributions

New hardship rules became effective for calendar year plans beginning January 1, 2019.  Most of these rules are welcome changes which should make more funds available to plan participants who are experiencing financial hardship.  

The final regulations eliminate the requirements that plan participants take loans from the plan to the extent they are available before they are permitted to take a hardship distribution from the plan and that participants may not make new contributions to the plan within six months of the hardship distribution. They also change the casualty loss hardship distribution rules for disaster relief and the rules for determining the amount of plan funds available for distribution, while clarifying the requirement that funds not be available from other sources. 

Read more in The Gold Book.

What's New? Cost of Living Adjustments

The Internal Revenue Service announcd cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2019. For details see:

Cost of Living Adjustments for Pension Plans

Traditional IRA Deductions

Roth IRA Contribution Limitations

What's New? 401(k) Hardship Distributions

The Bipartisan Budget Act of 2018 makes several changes to the hardship withdrawal rules that appear to be optional provisions and will become effective January 1, 2019. Read more in The Gold Book, Hardship Distributions section.

What's New? Changes to Hardship Withdrawal Rules

There have been recent legislative changes by the Bipartisan Budget Act of 2018 (“Budget Act”) which affect 401(k) and 403(b) plan hardship withdrawal requirements. The Gold Book has been updated with this information. See Hardship Distributions under 401(k) Plans section.