IRS Finalizes Updated Tables for Calculating Required Minimum Distributions

The IRS has finalized regulations updating the tables used by retirement plans (including 401(k) plans) to calculate required minimum distributions (RMDs). The changes, which were proposed in 2019 (see our Checkpoint article), generally lengthen distribution periods to reflect longer life expectancies and allow participants to keep larger amounts in their retirement plans for their later years. Here are highlights of the changes made to the final version of the regulations:

• Changes to Tables. In light of the regulations’ delayed effective date (see below), values in the tables have been adjusted to reflect mortality rates for 2022, rather than 2021. Also, entries for ages 70 and 71 in the Uniform Lifetime Table have been eliminated because under the SECURE Act—which was enacted after the updated tables were proposed—the age used to determine a participant’s required beginning date has increased to age 72 for individuals attaining age 70-1/2 after 2019 (see our Checkpoint article). The regulations do not provide for automatic updates to the tables. Instead, the IRS anticipates reviewing the tables in ten years or, if sooner, when a new study of individual annuity mortality experience is published.
• Applicability Date. The final tables are to be used for distribution calendar years beginning on or after January 1, 2022, rather than January 1, 2021. An example in the preamble explains that, for an individual who attains age 72 in 2021 and has a required beginning date of April 1, 2022, these tables will not apply to the RMD for the 2021 distribution calendar year (due April 1, 2022) but will apply to the RMD for the 2022 distribution calendar year (due December 31, 2022).
• Transition Rules. The final regulations include the proposed transition rules that allow the life expectancy of certain deceased employees and surviving spouses to be reset using the updated Single Life Table. Under the final regulations, however, the reset is only available if the employee or surviving spouse dies before January 1, 2022.

EBIA Comment: The 2022 applicability date provides some relief for those who will have to do the work of updating systems used for calculating RMDs. These tables may also be relevant for determining whether the 10% additional tax on early distributions applies to a series of substantially equal periodic payments. The preamble notes that the IRS anticipates updating the periodic payment guidance in Revenue Ruling 2002-62 (see our Checkpoint article) to reflect the new tables. The preamble also indicates that the IRS will be updating other RMD regulations to reflect the SECURE Act. That update is expected to revise examples to incorporate the new tables, and may reflect some stakeholder comments on the proposal that were beyond the scope of these regulations. For more information, see EBIA’s 401(k) Plans manual at Sections XII.I (“Required Minimum Distributions”) and XIV.K (“10% Additional Tax on Early Distributions”).

Contributing Editors: EBIA Staff.