Industry News

On December 10, 2024, the Internal Revenue Service (IRS) issued new frequently asked questions (FAQs) related to Required Minimum Distributions (RMDs) for retirement plans and IRAs. The FAQs clarify various provisions regarding the complex RMD rules.

The IRS states, “Required Minimum Distributions (RMDs) are minimum amounts that IRA and retirement plan account owners generally must withdraw annually starting with the year they reach age 73. Retirement plan account owners can delay taking their RMDs until the year in which they retire, unless they’re a 5% owner of the business sponsoring the plan. Owners of traditional IRA, and SEP and SIMPLE IRA accounts must begin taking RMDs once the account holder is age 73, even if they’re retired.”

It adds, “Retirement plan participants and IRA owners, including owners of SEP IRAs and SIMPLE IRAs, are responsible for taking the correct amount of RMDs on time, every year from their accounts, and they may face stiff penalties for failure to take RMDs.”

The FAQs include:

• For those that attain age 73 in 2024:
  • The first RMD is due by April 1, 2025, based on the participant’s account balance on December 31, 2023; and
  • The second RMD is due by December 31, 2025, based on the participant’s account balance on December 31, 2024.

• For defined contribution plan participants or IRA owners that die after December 31, 2019, the entire balance of the deceased participant’s account must be distributed within ten years. However, there is an exception for a surviving spouse, a child who has not reached the age of majority, a disabled or chronically ill person, or a person not more than ten years younger than the employee or IRA account owner.

The FAQs are available here.