New Proposed Regulations Regarding Required Minimum Distributions

On February 24, 2022, the Internal Revenue Service published proposed regulations that update the current regulations governing required minimum distributions (“RMDs”) from qualified plans (401(k), profit sharing, money purchase and defined benefit plans), 403(b) plans, individual retirement accounts (IRAs) and 457(b) plans. The proposed regulations reflect legislative and regulatory changes made to Section 401(a)(9) of the Internal Revenue Code since the publication of the last update in 2020, including the Setting Every Community Up for Retirement Enhancement Act of 2019 (the “SECURE Act”).

Per the proposed regulation’s preamble, the updates and clarifications include:

•Changing the required beginning date age for RMDs for participants born after June 30, 1949 to age 72 (remainsage 70-½ if the employee was born before July 1, 1949).•For participants with dates of death on or after January 1, 2020:oLimiting the use of the RMD life expectancy distribution rule to eligible designated beneficiaries (i.e., a spouse,a minor child, a disabled or chronically ill individual, or an individual not more than 10 years younger thanthe participant).oIncreasing the period by which a designated beneficiary must receive a full distribution of the deceasedparticipant’s account to the end of the calendar year containing the 10th anniversary of the deceasedparticipant’s death.oRetaining the 5 year distribution period for non-individual beneficiaries (e.g., estates, trusts, and charities).oExempting Section 457(b) tax-exempt and defined benefit plans from these rules.•Adding guidance on determining if a beneficiary is a designated beneficiary or eligible designated beneficiary.•Providing guidance on multiple beneficiary situations, determining a child beneficiary’s age of majority, anddocumentation of disabled or chronically ill beneficiary status.•Clarifying and simplifying the rules related to the use of beneficiary trusts.•Updating the list of distribution types not taken into account in determining whether an RMD has been made for acalendar year.•Updating the rules for RMDs paid from defined benefit plans and annuity distributions from defined contributionplans. For example, the proposed regulations address how a participant’s accrued benefit must be actuariallyincreased to take into account periods after age 70-½ for participants who are not 5-percent owners.•Updating the rules related to qualified longevity annuity contracts (QLACs).

If you have any questions, please contact Yvonne Roode at 631.434.8200 ext. 028

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