Compliance News | March 1, 2022

IRS Proposes Rule on Required Minimum Distribution Changes

The IRS has issued a proposed rule to restate and update its guidance on required minimum distributions from qualified retirement plans. The proposed rule would affect several types of retirement plans, IRAs and annuities. It would also revise requirements for eligible rollover distributions and excise taxes.

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Highlights of the proposed rule

The proposal, which was published in the February 24, 2022 Federal Register, is complex. It would eliminate the current rule’s question-and-answer format, update the rules for statutory changes since the rules were last updated and address issues that were raised in private letter rulings and comments.

Most significantly, the proposal incorporates these provisions of the SECURE Act of 2019:

  • Changing the age component of the required beginning date from 70½ to 72
  • Extending the post-death distribution period from five to 10 years for most beneficiaries
  • Limiting the beneficiaries who can receive lifetime payments to “eligible designated beneficiaries,” defined as spouses, minor children, disabled or chronically ill beneficiaries and non-spouse beneficiaries who are no more than 10 years younger than the participant

In general, the proposed rule would be effective for the calendar year beginning January 1, 2022.

The January 1, 2022 date is only a proposed date. In the case of rules as technical and complicated as these, it would not be surprising to see the final rules delayed.

Comments are welcome

Comments are due by May 25, 2022. There will be a public hearing on June 15, 2022.

Implications for plan sponsors

For 2021 calendar-year distributions, taxpayers must apply the existing rules, taking into account a reasonable, good-faith interpretation of the amendments made by the SECURE Act.

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This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.

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