Untitled Document

August 2024

IRS Finalizes RMD Regulations

These final RMD regulations go into effect on September 17, 2024. However, the applicability date or effective date for most of the new RMD rules is January 1, 2025.

The IRS adopted on July 19, 2024 with only minor changes the RMD rules set forth in the proposed regulation as issued on February 24, 2022. As many governmental entities, the IRS is stubborn. The IRS rarely adopts the suggestions made by the public. The IRS decided it was keeping its new special rules creating a deadline when a spouse who is the sole IRA beneficiary must elect to treat their deceased spouse’s IRA as his or her own IRA and that certain older spouse beneficiaries may have a hypothetical RMD which is ineligible to be rolled over.

The IRS has made very clear in its introductory comments to the final regulation that an IRA custodian/trustee’s duties with respect the RMDs related to inherited traditional IRA and inherited Roth IRAs are greatly limited. The IRS makes the express statement, “An IRA custodian has no obligation to ensure compliance with the required minimum distribution rules, so there is no need for a beneficiary of an IRA to file any type of election with custodian.”

The final RMD regulations also apply to 401(k), profit sharing, defined benefit and other employer sponsored plans.

An IRA custodian/trustee may adopt the approach with respect to inherited IRAs - it is the
responsibility of the IRA beneficiary to comply with the laws applying to a beneficiary. The final
regulations provide that the IRA custodian/trustee has no requirement to be provided documentation by a beneficiary that he or she is disabled or chronically ill. That is, there is no certification requirement regarding disability or being chronically ill. The IRA custodian/trustee may rely on the beneficiary’s instruction. Similarly, the trustee of a see-through trust is not required to provide any trust documentation to an IRA custodian/trustee. The IRA custodian/ trustee of a see-through trust may rely on the trustee’s instruction or method of RMD calculation.

The IRS has adopted the rule that if an IRA accountholder dies with multiple beneficiaries the RMD for that year may be satisfied by just one beneficiary rather than each beneficiary being required to withdraw their pro rata share of the RMD.

A person’s required beginning date is the April 1 of the year following:
1. the year a person attains age 70 1/2 if born before 7/1/1949;
2. the year a person attains age 72 if born during the period of 7/1/1949-12/31/1950;
3. the year a person attains age 73 if born during the period of 1951-1958; and
4. the year a person attains age 75 if born on or after January 1, 1960.

The law must be corrected for those born in 1959 as the current law Is unclear whether the RMD age is age 73 or 75. It appears that Congress will adopt age 73.

The final RMD rules apply as of January 1, 2025. For years prior to 2023 a taxpayer is to apply the 2002 and 2004 final regulations and is to apply a reasonable good faith interpretation of the amendments made by the SECURE Act. For 2023 and 2024 a taxpayer is to apply a reasonable good faith interpretation of the amendments made by the SECURE Act 2.0.