On July 14, 2023, the IRS made multiple announcements concerning required minimum distributions (RMDs), including relief concerning RMDs and rollovers in accordance with Section 107 of SECURE 2.0.
As background, the SECURE Act increased the age for determining an individual’s required beginning date to age 72 and the SECURE 2.0 Act increased it to age 73 beginning January 1, 2023.
The IRS says that after SECURE 2.0 was enacted, plan administrators and other payors indicated that automated payment systems would need to be updated to reflect the change in the required beginning date, and that the revisions could take time to implement. As a result, they warned, plan participants and IRA owners who would have been required to begin receiving RMDs for calendar year 2023 and who receive distributions in 2023 could have had them mischaracterized as RMDs—and therefore ineligible for rollover.
Accordingly, the guidance grants certain relief relating to certain distributions made during 2023 to individuals. The IRS says that a payor or plan administrator will not be considered to have failed to satisfy the requirements of Internal Revenue Code (IRC) Sections 401(a)(31), 402(f), and 3405(c) just due to a failure to treat certain distributions as eligible rollover distributions.
This relief applies regarding any distribution made from a plan between Jan. 1, 2023, and July 31, 2023.
As a result of this amendment, IRA owners who will attain age 72 in 2023 (that is, individuals born in 1951) will have a required beginning date of April 1, 2025, rather than April 1, 2024. This delay in the required beginning date means that these IRA owners (who, prior to enactment of the SECURE 2.0 Act, would have been required to take minimum distributions from their IRAs for 2023) will have no RMD due from their IRAs for 2023.
The Internal Revenue Service has reassured IRA beneficiaries subject to the 10-year rule that they do not need to take required minimum distributions in 2023 from accounts they inherited in 2020 or later.
The Treasury Department and the IRS are extending the 60-day rollover period for certain IRA distributions made to an IRA owner (or the IRA owner’s surviving spouse), so that the deadline for rolling over that portion of the distribution will be Sept. 30, 2023.
The distributions that are subject to this extension are distributions made from an IRA between Jan. 1, 2023, and July 31, 2023, to an IRA owner born in 1951.
DISCLAIMER: The WM Update, WM Wednesday Wisdom, WM Daily Update, and other related communications are intended to provide general information, as of the date of this communication, and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.