New Regulations Impacting Required Minimum Distributions (RMDs)
Recent changes in tax law have brought significant updates to the treatment of Required Minimum Distributions (RMDs) from qualified retirement plans. The Treasury Department and IRS have finalized new regulations that address how these changes affect beneficiaries of inherited retirement accounts.
Understanding the 10-Year Rule
Under the 2019 SECURE Act, non-eligible designated beneficiaries (non-EDBs) of inherited retirement accounts are required to distribute the entire balance by the end of the 10th year after the original account owner’s death. This rule applies to most non-spouse beneficiaries who are more than 10 years younger than the deceased and aren’t their minor children.
The statute initially left some questions unanswered, particularly about the timing of these distributions. In 2022, the IRS clarified that if the original account owner had started taking RMDs, non-EDBs must continue to do so annually and distribute the entire account by the 10th year.
Final Regulations and Waivers
Despite some opposition, the final regulations issued on July 18, 2024, largely upheld the IRS’s interpretation, requiring annual RMDs for non-EDBs. However, the IRS has waived these annual RMDs from 2021 to 2024. As a result, the new regulations will apply starting in 2025.
Additional Guidance and Proposed Regulations
The finalized regulations provide further guidance on various scenarios, such as the treatment of Roth accounts in employer plans, rules for surviving spouses, and documentation requirements for eligible beneficiaries. The IRS has also proposed new regulations that address provisions from the SECURE 2.0 Act, which are still under review.
Have Questions?
If you need more information on how these changes might affect you, don’t hesitate to reach out to us. We’re here to help navigate these complex tax regulations and ensure you’re well-informed.
