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IRS Issues Updated Guidance Regarding Substantially Equal Periodic Payments

The IRS recently issued Notice 2022-6 (the “Notice”), which provides guidance regarding how to determine whether a series of payments from a qualified retirement plan is considered a series of substantially equal periodic payments and is thus exempt from the 10% excise tax under Code Section 72(t). Payments are exempt from that excise tax if they are made in accordance with one of the following methods: (i) the required minimum distribution method, (ii) the fixed amortization method, or (iii) the fixed annuitization method. The Notice provides an updated life expectancy table that can be used to determine distribution periods for the required minimum distribution method and the fixed amortization method. In addition, the Notice modifies the existing minimum interest rate that may be used to apply the fixed amortization method and the fixed annuitization method (which is 120% of the federal mid-term rate) to add a 5% floor. The guidance… Continue Reading

Required Minimum Distributions Resume December 31st

The IRS recently issued a news release reminding retirement plan participants that required minimum distributions (“RMDs”) must be made by December 31st. RMDs are minimum amounts that must be distributed to a retirement plan participant each year beginning with the year in which such participant attains age 72 (age 70½ if the participant attained 70½ before January 1, 2020) or, if later, the year in which the participant retires. If the participant is a 5% owner of the employer sponsoring the retirement plan, RMDs must begin once the participant attains age 72 (or 70½ if the participant attained age 70½ before January 1, 2020), regardless of retirement status. The CARES Act waived the RMD requirement for 2020, including the RMD that was payable on or before April 1, 2021, for a participant with a required beginning date of April 1, 2021. A participant who attained age 70½ in 2019 (the… Continue Reading

Required Minimum Distributions: A Tragedy in Three Acts

The SECURE Act and CARES Act made significant changes to required minimum distributions (?Ç£RMDs?Ç¥). What should you be doing to ensure your retirement plans are administered correctly? The first step is to understand your options. SECURE Act Shifts the Start Before the SECURE Act, RMDs had to begin by April 1st of the calendar year following the later of (i) the calendar year during which the participant retires or (ii) the calendar year in which the participant turns age 70??.?á Following the passage of the SECURE Act, the age cutoff in that rule changed from age 70?? to age 72, but only for individuals who turned age 70?? on or after January 1, 2020 (i.e., individuals born on or after July 1, 1949). In short, those terminated vested participants born before July 1, 1949 had to start their RMDs by April 1 of the year after turning 70??, while those… Continue Reading

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