ERISA Insights – IRS Releases RMD Regulations
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More than two years after releasing proposed regulations that revised the required minimum distribution (RMD) regulations and other related guidance, the Internal Revenue Service (IRS) has released final regulations that revise existing regulations applicable to RMDs, eligible rollover distributions, and excess accumulation tax.
The IRS released proposed regulations in February 2022 in order to address changes made by the Setting Every Community Up for Retirement Enhancement (SECURE) Act. While the final regulations contain some changes, overall they follow the proposed regulations and reflect changes made by both the SECURE Act and the SECURE 2.0 Act. The IRS notes that the final regulations retain the provision requiring certain beneficiaries to take annual distributions under the 10-year rule if an account owner died on or after the required beginning date. While the IRS has issued transition relief under this annual distribution requirement through the 2024 distribution calendar year, the transition relief does not apply to RMDs for calendar years beginning on or after January 1, 2025, and does not extend the 10-year deadline by which a full distribution is required to be made.
The final regulations were published in the Federal Register on July 19, 2024, and will be effective September 17, 2024. For purposes of determining RMDs, the revised RMD regulations apply for calendar years beginning on or after January 1, 2025. Amended regulations related to rollovers apply for distributions on or after January 1, 2025, and amended regulations related to the excise tax on RMD failures apply for taxable years beginning on or after January 1, 2025.
The IRS has also issued concurrent proposed regulations that address additional provisions under the SECURE 2.0 Act, such as distributions from designated Roth accounts and the spousal election to be treated as the participant for RMD purposes. Comments may be submitted may be submitted through September 17, 2024. A public hearing on this proposed regulation is scheduled for September 25, 2024.
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