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On July 19, 2024, the Internal Revenue Service (IRS) released final and newly proposed regulations related to Required Minimum Distributions (RMDs). The final regulations address the significant changes to Internal Revenue Code section 401(a)(9) under the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE 1.0 Act) and SECURE 2.0 Act (enacted as part of the Consolidated Appropriations Act, 2023), and also make other changes to the eligible rollover rules.

The final regulations clarify various compliance issues regarding the complex RMD rules. The regulations impact the calculation of RMDs from qualified plans, IRAs, tax-deferred annuities under Internal Revenue Code section 403(b) (TDAs), and 457(b) plans. The 2024 final regulations cover the SECURE 1.0 changes included in the 2022 proposed regulations, and certain other SECURE 2.0 changes.

The final regulations update several existing regulations under sections 401(a)(9), 402(c), 403(b), 457, and 4974 to reflect statutory amendments that were made since those regulations were last issued and clarify certain issues from public comments and private letter ruling requests. These regulations also replace the question-and-answer format of the existing regulations under sections 401(a)(9), 402(c), 408, and 4974 with a standard format.

In addition, the final rules clarify the new 10-year rule regarding RMD withdrawals and inheritance issues. Notably, the rule determines whether non-spouse beneficiaries have to take annual required minimum distributions during the 10 years following the original account holder’s death, or if they can wait and withdraw the entire amount at the end of the decade.

The final regulations are effective as of September 17, 2024. Compliance with the final regulations is required beginning January 1, 2025, with a reasonable, good faith standard for prior years. Plan amendments are not required for most plans until December 31, 2026.

In the 2024 proposed RMD regulations, the IRS codified additional details about implementing various significant changes under SECURE Act 2.0. Among others to address various provisions that were reserved in the 2024 final regulations, the proposed regulations clarified that those born in 1959 would have an RMD of age 73.

For the proposed regulations, the IRS requested comments by September 17, 2024 and a public hearing is scheduled on September 25, 2024.

Importantly, plan sponsors should review the new final regulations to determine if any changes are necessary for 2025 and if their plan documents need to be updated to provide the complex applicable RMD rules.

The final and proposed RMD regulations are available respectively here and here.