The Department of the Treasury and the IRS have published final regulations setting final regulations on required minimum distributions (RMD) for beneficiaries under certain qualified plans. These include IRC section 403(b) annuity contracts, individual retirement accounts and annuities (IRAs), custodial accounts, and certain deferred compensation plans.
The final regulations "generally follow" the IRS's originally proposed regulations issued in 2022, though with several changes in response to comments. Specifically, the IRS reviewed comments suggesting that a beneficiary of an individual who has started required annual distributions should not be required to continue those annual distributions if the remaining account balance is fully distributed within 10 years of the individual's death as required by the SECURE Act (the "10-Year Rule").
However, Treasury and IRS determined that the final regulations should retain the provision in the proposed regulations requiring such a beneficiary to continue receiving annual payments.
The final regulations further:
- raise the starting age for RMDs;
- simplify rules for older beneficiaries;
- require minor child beneficiaries to continue to take annual payments from ages 21 to 31;
- update the spousal IRA rollover rule; and
- provide relief from the multiple beneficiary rule for certain look-through trusts.
The IRS further updated the regulations' application to RMDs beginning 1 January 2025.
Simultaneously, Treasury and IRS issued additional proposed regulations, addressing additional RMD issues under the Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act. The proposed regulations addressed additional questions that weren't covered in the final regs regarding the RMD provisions enacted in SECURE 2.0, including outright distributions to trust beneficiaries, spousal elections for spouses to be treated as the deceased employee for distributions, and corrective distributions.
The final and proposed regulations are effective 17 September 2024, with the proposed regulations scheduled for a public hearing on 25 September 2024.
Source: IBFD Tax Research Platform News