The IRS has issued limited transition relief for plan administrators, payors, plan participants and beneficiaries to address changes in required minimum distribution (RMD) requirements for qualified plans (including 401(k) plans), IRAs, Roth IRAs, 403(b) plans, and 457(d) eligible deferred compensation plans made by the SECURE Act (see our article) and the SECURE 2.0 Act (see our article). 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 SECURE Act also significantly altered the timing requirements for RMDs made to designated beneficiaries after a participant’s death. Here are highlights of the relief for 401(k) plans:
- Change in Required Beginning Date. Notice 2023-54 explains that, due to the time needed to revise automated payment systems to implement the change from age 72 to 73, some distributions in 2023 to individuals turning 72 in 2023 could be mistakenly treated as RMDs, which are ineligible for rollover. The notice provides that plan administrators and other payors will not be considered to have violated applicable law for failure to treat certain distributions as eligible rollover distributions. This relief applies with respect to any distribution made from a plan between January 1, 2023, and July 31, 2023, to a participant born in 1951 (or that participant’s surviving spouse) that would have been an RMD but for the date change made by the SECURE 2.0 Act. The 60-day rollover period is also extended for any such distribution, so that the deadline for rolling over such a distribution is September 30, 2023.
- Specified RMDs for 2023. Notice 2023-54 also updates relief relating to “specified” RMDs set forth in IRS Notice 2022-53 (see our article) to include certain deaths in 2022. A defined contribution plan such as a 401(k) plan will not be treated as failing to satisfy the RMD rules for failure to make a specified RMD in 2023, and a taxpayer will not be subject to an excise tax for having failed to take a specified RMD.
- Applicability Date for Final Regulations. The notice provides that final regulations relating to RMDs will apply for calendar years beginning no earlier than 2024. (Proposed regulations were issued in 2022 (see our article), and Notice 2022-53 specified that they would not apply before 2023.)
EBIA Comment: The IRS continues to provide welcome transition relief to plan administrators and payors for RMD changes made by the SECURE and SECURE 2.0 Acts. The short-term relief relating to the change in the required beginning date under the SECURE 2.0 Act is of special importance to plan administrators because it obviates the need for mandatory withholding and section 402(f) notices for distributions mistakenly treated as RMDs rather than eligible rollover distributions. For more information, see EBIA’s 401(k) Plans manual at Sections XII.I (“Required Minimum Distributions”) and XII.C.7 (“When Is Distribution Made Following Death?”).
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