Notice 2022-53 announces the intent to issue final regulations related to required minimum distributions (RMDs) under §401(a)(9) that will apply for the 2023 distribution year. In addition, this notice provides guidance related to certain provisions of §401(a)(9) that apply for 2021 and 2022.
The §401(a)(9) proposed regulations contain a new 10-year rule for beneficiaries who are not eligible designated beneficiaries. Annual RMDs must continue to be taken for decedents who were already in RMD years when they passed away, with full distribution required by the end of the 10th calendar year following the calendar year of the employee’s death. Under the original guidance, these beneficiaries could delay any and all RMDs until the end of the 10th year after the death of the owner.
The proposed regulations impact the next beneficiary. If an eligible designated beneficiary of an employee is using the lifetime or life expectancy payment alternative to the 10-year rule and then the eligible designated beneficiary passes away, the beneficiary of the eligible designated beneficiary must continue to take annual distributions after the death of that beneficiary with a full distribution made no later than the 10th year after the year of the eligible designated beneficiary’s death.
The proposed regulations provide for similar treatment (i.e., annual RMDs with a requirement to take a full distribution no later than the 10th year) in the case of a designated beneficiary who is a minor child. RMDs are still delayed until the child reaches the age of majority.
It appears the IRS is making these proposed final regulations retroactive for tax years 2021 and 2022, but failure to follow them will not result in penalty assessment.
If a taxpayer did not take a specified RMD, the IRS will not pursue an excise tax under §4974. If a taxpayer has already paid an excise tax for a missed RMD in 2021 that constitutes a specified RMD, the individual may request a refund of that excise tax.
For purposes of this notice only, a specified RMD is any distribution that, under the new interpretation included in the proposed regulations, would have been required in 2021 or 2022 if that payment would be required to be made to a designated beneficiary under the plan (or IRA owner) if: (1) the employee (or IRA owner) died in 2020 or 2021 and on or after the employee’s (or IRA owner’s) required beginning date, and (2) the designated beneficiary is not taking lifetime or life expectancy payments pursuant to §401(a)(9)(B)(iii)
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Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.