IRS Offers Transition Relief for RMDs
The IRS and the U.S. Treasury Department recently issued Notice 2023-54, providing transition relief regarding the change in the required beginning date for required minimum distributions (RMDs) under the SECURE 2.0 Act of 2022.
The required beginning date for RMDs was changed under Sec. 401(a)(9), pursuant to Section 107 of the SECURE 2.0 Act, enacted as Division T of the Consolidated Appropriations Act, 2023, P.L. 117-328. The defined required beginning date had originally referenced April 1 of the calendar year following the calendar year in which a person reaches age 72. The new required beginning date is defined by reference to April 1 of the calendar year after the calendar year in which someone reaches age 73 or 75, depending on the person’s birthdate.
The notice also provides relief related to certain distributions made during the first half of 2023 that were characterized as RMDs but are not RMDs as a result of the SECURE 2.0 Act. The relief includes:
- A payer or plan administrator who did not treat certain distributions as eligible rollover distributions will not be considered to have failed to meet the requirements of the Act. This relief applies to distributions made between Jan. 1, 2023, and July 31, 2023, to a participant born in 1951 (or the surviving spouse) that would have been an RMD if not for the change in the required beginning date.
- The 60-day rollover period for distributions not treated by a payer or plan administrator as eligible rollover distributions is extended to Sept. 30, 2023.
- The IRS is extending the 60-day rollover period for certain distributions made to an IRA owner (or the owner's surviving spouse) by extending the deadline for rolling over that potion of the distribution to Sept. 30, 2023. The distributions must have been made between Jan. 1, 2023, and July 31, 2023, to an IRA owner born in 1951 (or the surviving spouse) that would have been RMDs before the required beginning date under Section 107.
In addition, the notice provides guidance regarding specified RMDs as defined in the notice for 2023. The guidance says a defined contribution plan that failed to make a specified RMD will not be treated as having failed to satisfy the Sec. 401(a)(9) minimum distribution rules merely because it did not make that distribution. To the extent a taxpayer did not take a specified RMD, the IRS will not assert that an excise tax is due under Sec. 4974.
In the notice, the IRS also announced it will finalize February 2022’s proposed regulations REG-105954-20 for RMDs and that the final regulations will apply no earlier than calendar year 2024.