On Jul. 19, US IRS issued rules on required minimum distributions.
US IRS published final rules on required minimum distributions from qualified plans.
Updated regulations under sections 401(a)(9), 402(c), 403(b), 457, 4974 to reflect statutory amendments, making amendments to 26 CFR 1, 26 CFR 31, 26 CFR 54.
Reflected amendments to Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) and sections of SECURE 2.0 Act of 2022 (SECURE 2.0 Act).
Follows IRS's proposed regulations published for comments in 2022, see #130221.
Minimum Distribution Requirement
Final rules do not change obligation that, for contract excepted from Sec 401(a)(9)(H), method, amount of annuity payments be irrevocably selected before Dec. 20, 2019.
Apply qualified annuity exception when employee died, after death, beneficiary made irrevocable election on method, amount of annuity payments before Dec. 20, 2019.
Clarified separate application of Section 401(a)(9) only applies for calendar years after employee death, adds expenses to items allocated in reasonable, consistent manner.
Restored flexibility by providing distribution to any beneficiary, not to the beneficiary.
Distributions During Employee's Lifetime
While final rules do not provide uniform required beginning date of Apr. 1 following year employee is 70 1/2, IRS notes, plan could require benefits commence by date.
Clarified employee treated as retired if not 5% owner, has benefits under plan by more than 1 employer, and retires from employment from any of employers participating.
Death Before Required Beginning Date
Clarified requirement to take annual distribution per satisfaction of life expectancy rule continues apply for all future calendar years until employee interest fully distributed.
Requirement to specify default applies only if plan uses different default than default apply under rules if employee or designated beneficiary not make affirmative election.
Plan may provide that particular distribution method apply to certain beneficiary category or election to which method applies is available for only certain categories.
Designated Beneficiaries
Retained see-through trust concept in 2002 final regulations which certain beneficiaries of trust treated as beneficiaries of employee if the trust meets specified requirements.
Defined Contribution Plans
Retained general method in the 2002 final regulations by which a required minimum distribution from a defined contribution plan is calculated in any calendar year.
When employee dies on, after required beginning date or employee eligible designated beneficiary taking annual life expectancy payments after employee dies before date.
Implemented amendments made by SECURE Act Section 401 by requiring that a full distribution of the employee's remaining interest be taken in certain circumstances.
Provided for required minimum distributions from defined benefit plans and annuity contracts (including annuities used pay benefits under defined contribution plan).
Effectiveness
Amendments to final regulations are effective on Sep. 17, 2024.
Applicability Dates
Amended Sec 1.401(a)(9)-1 through 1.401(a)(9)-9, 1.403(b)-6(e), 1.408-8 apply for determining required minimum distributions for calendar years on, after Jan. 1, 2025.
Amended Section 1.402(c)-2 applies for distributions made on or after Jan. 1, 2025.
Section 54.4974-1 applies for taxable years beginning on or after January 1, 2025.
For earlier years, apply preexisting final regulations, taking into account reasonable, good faith interpretation of amendments of SECURE 2.0 Act Sections 114 and 401.
Compliance with the proposed regulations will satisfy that requirement.
For 2023 and 2024 distribution calendar years, must also take into account good faith interpretation of amendments in SECURE 2.0 Act Sections 107, 201, 202, 204, 337.
