The IRS finalized its proposed rule on required minimum distributions, including requirements for distributions from a qualified retirement plan—such as an IRA—during the life of the retirement employee and after the death of the employee.
Implementing the legislative requirements of SECURE and SECURE 2.0, the final rule sets a required beginning date for distributions and identifies the period during which the employee’s entire interest must be distributed. Among other things, the final rule clarifies how the new 10-year rule on distributions operates for eligible beneficiaries—such as an employee’s spouse, minor child, a chronically ill or disabled person, or another beneficiary not more than 10 years younger than the employee—and for other, “ineligible” beneficiaries. While eligible beneficiaries have some flexibility on the manner and timing of distribution of their inherited interest, ineligible beneficiaries must have their entire interest distributed within a 10-year period.
Acknowledging the American Bankers Association’s position that banks do not want to be responsible for maintaining or protecting a beneficiary’s private health care information that is not necessary to fulfill their role as IRS trustee/custodian, the agency adopted the recommendation that IRA trustees and custodians not be required to obtain documentation—as is the case for plan administrators—of an eligible beneficiary’s disability or chronic illness. IRS also adopted ABA’s recommendation that the final rule’s applicability date be prospective, not retroactive as contained in the proposal. The final rule is effective Sept. 24 and applies for purposes of determining RMDs for calendar years beginning on or after Jan. 1, 2025.
