MEDIA ALERT – New IRS guidance on Required Minimum Distributions

Rhea-AI Summary

Wolters Kluwer has analyzed the changes to Required Minimum Distributions (RMDs) following the SECURE Act of 2019, enacted on December 20, 2019. The IRS released proposed regulations on February 24, 2022, clarifying key provisions. Notable clarifications include the extension of the RMD age from 70½ to 72, beneficiary distribution periods, and definitions of eligible designated beneficiaries. These regulations aim to provide clarity on tax implications for retirement savings, reinforcing the need for proper compliance and planning.

Positive

• Clarification on RMD commencement age from 70½ to 72 enhances taxpayer understanding.
• Proposed regulations provide greater clarity on complex SECURE Act provisions.
• Clear definitions of eligible designated beneficiaries promote compliance.

Negative

• Unexpected interpretations in the proposed regulations could lead to complexities for taxpayers.

Wolters Kluwer looks at guidance on changes made to Required Minimum Distributions by the SECURE Act in 2019

Wolters Kluwer:

What: The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), enacted on December 20, 2019, as part of the Further Consolidated Appropriations Act of 2019, included several tax changes to help taxpayers save for retirement. The SECURE Act included several changes with respect to required minimum distributions (RMDs). On February 24, 2022, over two years after enactment of the SECURE Act, the Internal Revenue Service (IRS) has released proposed regulations with respect to those changes to RMDs.

Why: The proposed regulations provide greater clarity on many of these SECURE Act provisions, while also including some unexpected interpretations of the statute.

• RMD Commencement Age. The SECURE Act extended the RMD commencement age from 70 ½ to 72
• Age Change Effective Date. The proposed regulations provide helpful clarification in regard to whom the age change applies
• Beneficiary Distribution Period. The SECURE Act prohibited designated beneficiaries inheriting a retirement plan or an IRA from taking distributions over the beneficiary’s lifetime unless they were eligible designated beneficiaries
• Eligible Designated Beneficiary. The proposed regulations clarify who qualifies as an eligible designated beneficiary and can still take distributions from inherited retirement accounts over their lifetimes
• Age of Majority. The proposed regulations clarify when a child is considered to reach the age of majority
• Disability. The proposed regulations clarify who is considered disabled and the required documentation, as well as create a safe harbor for determination of disability
• Trusts. The proposed regulations discuss the various types of trust beneficiaries
• Distribution Requirements. The SECURE Act specifies that beneficiaries who are not eligible designated beneficiaries must take distributions within a ten-year period
• Distributions that Had Commenced at or prior to Death. The proposed regulations specify that distributions that had commenced to the participant prior to death must continue annually to an ineligible designated beneficiary in years one through nine following the participants death and be completed in year ten
• Annual Distribution Requirement. Many tax practitioners had interpreted the SECURE Act and prior IRS guidance as permitting distributions all in year ten without the requirement for annual distributions

Who: Tax expert Mark Luscombe, JD LL.M, CPA, Principal Federal Tax Analyst at Wolters Kluwer Tax & Accounting, can help sort through the various rules with respect to required minimum distributions.

PLEASE NOTE: These materials are designed to provide accurate and authoritative information in regard to the subject matter covered. The information is provided with the understanding that Wolters Kluwer Tax & Accounting is not engaged in rendering legal, accounting, or other professional services.

Contact: To arrange interviews with Mark Luscombe and other federal and state tax experts from Wolters Kluwer Tax & Accounting on this or any other tax-related topics, please contact Bart Lipinski.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220324005044/en/

BART LIPINSKI

847-267-2225

Bart.Lipinski@wolterskluwer.com

Source: Wolters Kluwer Tax & Accounting

FAQ

What are the changes to Required Minimum Distributions according to the SECURE Act?

The SECURE Act changed the RMD commencement age to 72 and clarified beneficiary distribution requirements.

When were the IRS proposed regulations on RMDs released?

The IRS released proposed regulations on February 24, 2022, regarding changes from the SECURE Act.

How does the SECURE Act affect designated beneficiaries for retirement plans?

The SECURE Act limits distributions over a beneficiary's lifetime unless they are classified as eligible designated beneficiaries.

What is the new age of majority for RMDs as per the proposed regulations?

The proposed regulations clarify the age when a child is considered to reach the age of majority for RMD purposes.

What documentation is required to determine disability under the new RMD regulations?

The proposed regulations specify required documentation for disability determination and provide a safe harbor.