At a Glance:
On July 18, 2024, the IRS issued final regulations regarding required minimum distributions (RMDs) from retirement accounts and proposed regulations that provide additional guidance under the SECURE 2.0 Act.
Final Regulations: Beneficiaries generally must continue to take annual distributions if the plan participant died on or after the required beginning date. A link to the final regulations can be found here.
Proposed Regulations: Provide guidance addressing other RMD issues under the SECURE 2.0 Act not addressed in the final regulations. A link to the proposed regulations can be found here.
Impact:
Many clients take advantage of the tax benefits associated with retirement accounts to build substantial wealth. However, without appropriate planning, these retirement accounts can be subject to estate and income taxation after the account holder’s death. Clients and advisors alike should review these regulations to ensure sound planning that minimizes the impact of these taxes.
Final Regulations:
In a news release (linked here), the IRS stated that these final regulations reflect changes made by the SECURE Act and the SECURE 2.0 Act and generally adhere to the proposed regulations issued in 2022. The final regulations will generally become effective on or after January 1, 2025.
These regulations confirm that most retirement account beneficiaries must take annual RMDs over 10 years and exhaust the entire account at the end of the 10th year. However, if the account owner passes away before reaching the age at which they are required to take RMDs, the beneficiaries enjoy more latitude in timing their withdrawals within the 10-year period. The final regulations impact RMDs from qualified plans, section 403(b) annuity contracts, custodial accounts, some retirement accounts, individual retirement accounts, and some eligible deferred compensation plans.
Proposed Regulations:
The IRS also issued proposed regulations addressing other issues under the SECURE 2.0 Act. These issues include applicable age determinations for employees born in 1959, annuity contracts purchased with portions of an employee’s individual account, distributions from designated Roth accounts, reductions or waivers of excise tax, surviving spousal elections, the effect of divorce after purchase of a qualifying longevity annuity contract, and outright distributions to a trust beneficiary. The comment period for the proposed regulations will be open until September 17, 2024.
