IRS Issues Final and Proposed Regulations on Required Minimum Distributions (RMDs)
T.D. 10001; Proposed Regulations, NPRM REG-103539-23; IR-2024-190
Effective for Distribution Calendar Years Beginning January 1, 2025
Key Highlights:
- The IRS has issued final and proposed regulations addressing Required Minimum Distributions (RMDs) under Code Sec. 401(a)(9), reflecting changes from the SECURE Act (P.L. 116-94) and SECURE 2.0 Act (P.L. 117-328).
- These changes affect qualified retirement plans and IRAs, with the final regulations applying to distributions starting on January 1, 2025. The proposed regulations address additional provisions from the SECURE 2.0 Act.
Final Regulations:
- Increased RMD Age: As per the SECURE Act, the starting age for RMDs is increased (from 72 to 73) for individuals who reach 73 after 2023.
- 10-Year Rule for Beneficiaries:
- For individuals who pass away after their required beginning date, the 10-year distribution rule for designated beneficiaries requires that annual distributions continue throughout the 10-year period.
- The 10-year rule applies to eligible designated beneficiaries, including minor children, who must continue distributions until reaching the age of majority.
- Treatment of Trusts: Special rules are provided for see-through trusts and those with multiple beneficiaries, including those that allow a surviving spouse to utilize the 10-year rule.
- Transition Relief: Relief provisions remain in place through 2024, giving individuals and beneficiaries additional flexibility.
Proposed Regulations:
- Age 73 or 75: For individuals born in 1959, the IRS proposes 73 as the age for starting RMDs, aligning with previous interpretations.
- Additional Comments Sought: The IRS is requesting public comments on various RMD-related issues, including the aggregation of annuity purchases with individual account portions, treatment of Roth accounts, and the effect of divorce on qualifying longevity annuity contracts (QLACs).
Effective Dates:
- The final regulations are effective for distribution years starting January 1, 2025. For years prior to this, taxpayers should apply prior IRS regulations alongside a good faith interpretation of the SECURE and SECURE 2.0 Act provisions.
Additional IRS Regulatory Updates:
Cross-Border Triangular Reorganizations and Inbound Transactions
T.D. 10004
The IRS has finalized regulations concerning cross-border triangular reorganizations and inbound nonrecognition transactions. These final rules focus on the treatment of property used to acquire parent stock in triangular reorganizations, including special provisions for excess asset basis (EAB) rules and reporting of inbound exchanges.
Disaster Relief Updates
The IRS has updated disaster relief notices for victims of severe weather events, including floods, wildfires, and tornadoes in New Mexico, Oklahoma, and Florida. These updates include additional counties eligible for relief measures.
July 2024 Plan Liability Rates
For pension plans beginning in July 2024, the IRS has released updated interest rates for the minimum present value segment rates and 30-year Treasury bond weighted averages to aid in calculating pension plan liabilities.
- Corporate Bond Segment Rates:
- 1st Segment: 4.99%
- 2nd Segment: 5.29%
- 3rd Segment: 5.29%
- 30-Year Treasury Weighted Average: 3.52%
This article is posted at wolterskluwer.com
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