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Review Required Minimum Distribution Compliance in Light of Deadline Changes

The SECURE Act changed the deadline for commencing required minimum distributions (“RMDs”) from a tax-qualified retirement plan. Following the change, a retired individual who reached age 70½ before January 1, 2020, must begin receiving RMDs by no later than April 1st of the year after turning 70½, whereas a retired individual who reaches age 70½ on or after January 1, 2020, must begin receiving RMDs by no later than April 1st of the year after reaching age 72. This change means that retired individuals who reached age 70½ in 2019 (i.e., who had a 70th birthday from July 1, 2018 through June 30, 2019) were required to take their first RMD by April 1, 2020 and then take subsequent RMDs on December 31st of each year.  However, as we previously reported here, the CARES Act suspended the requirement to make RMDs in 2020, including initial distributions on April 1, 2020.… Continue Reading

Deadline to Provide Initial Lifetime Income Illustrations is Approaching

As discussed in our prior blog post here, the SECURE Act requires plan administrators to provide annual statements illustrating participants’ accrued benefits in two lifetime income stream illustrations: (i) a single life annuity, and (ii) a qualified joint and survivor annuity. The statements must include a clear and understandable explanation of the assumptions underlying the illustrations.    Participant-directed individual account plans that furnish quarterly benefit statements to participants must include a participant’s lifetime income illustrations on at least one statement in any 12-month period. The initial lifetime income illustrations must be included on the quarterly statement for the second calendar quarter of 2022 if the illustrations were not included on an earlier statement.  A DOL fact sheet on Lifetime Income Illustrations is available here. A list of FAQs implementing the DOL interim final rule is available here.  

Proposed Required Minimum Distribution Regulations Clarify Application of Ten-Year Rule for Designated Beneficiaries

The IRS recently issued proposed regulations interpreting the changes in the required minimum distribution requirements resulting from enactment of the SECURE Act. Under the ten-year rule, a distribution of the participant’s entire interest must be made to a designated beneficiary who is not an eligible designated beneficiary within ten years after the death of the participant, regardless of whether the owner died before reaching his or her required beginning date. Among the proposed regulations, the IRS clarified that if a participant dies following his or her required beginning date, in addition to satisfying the ten-year rule, the participant’s benefit must also continue to be distributed to the beneficiary at least as rapidly as it was being distributed when the participant died.  The IRS Proposed Regulations are available here.

New Proposed Regulations May Signal Administration Shift in Focus to Benefit Plans

Whenever a new president from a different political party is elected, it’s not unusual for plan sponsors to expect changes in policy resulting in new laws and regulations impacting benefit plans. Though President Biden’s administration primarily focused on the pandemic and other areas of foreign and domestic policy in its first year, it recently has turned its attention to benefit plans with the issuance of two new proposed regulations, as described below.   Proposed Regulations on Required Minimum Distributions – On February 24, 2022, the IRS released proposed regulations that update the required minimum distribution requirements to reflect changes made by the SECURE Act and contain additional guidance regarding required minimum distribution requirements. The IRS is currently taking comments on the proposed regulations until May 25, 2022.  Proposed Regulations on Prohibited Transaction Exemption Filing Procedures – The DOL recently announced proposed amendments to the procedures governing the filing and processing of… 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

IRS Publishes Updated Operational Compliance Checklist

The IRS recently updated its Operational Compliance Checklist (the ?Ç£Checklist?Ç¥) to include qualification requirements that will become effective during the 2021 and 2022 calendar years. Examples of items added to the Checklist for 2021 and 2022 include, among other things: Final regulations relating to updated life expectancy and distribution tables used for determining minimum required distributions; The SECURE Act requirement that qualified cash or deferred arrangements must allow long-term employees (i.e., employees who work at least 500 but less than 1,000 hours per year for three consecutive 12-month periods beginning on or after January 1, 2021) to participate; and Temporary relief from the physical presence requirement for spousal consents under qualified retirement plans. The Checklist is only available online and is updated periodically to reflect new legislation and IRS guidance. The Checklist does not, however, include routine, periodic changes, such as cost-of-living increases, spot segment rates, and applicable mortality tables,… 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

IRS Publishes Updated Operational Compliance Checklist

The IRS recently published an updated Operational Compliance Checklist (the ?Ç£Checklist?Ç¥), which lists changes in qualification requirements that became effective during the 2016 through 2020 calendar years. Examples of items added to the Checklist for 2020 include, among other things: Final regulations relating to hardship distributions; Temporary nondiscrimination relief for closed defined benefit pension plans; Penalty-free withdrawals from retirement plans for individuals in cases of birth or adoption; and Increase in age for required beginning date for mandatory distributions. The Checklist is only available online and is updated periodically to reflect new legislation and IRS guidance.?á The Checklist does not, however, include routine, periodic changes, such as cost-of-living increases, spot segment rates, and applicable mortality tables, which can instead be found on the IRS?ÇÖs Recently Published Guidance webpage here. The Checklist is available here.

IRS Extends Deadline to Roll Over Waived RMD Distributions / Provides Model Amendment

The IRS issued Notice 2020-51 which provides additional guidance and relief relating to the required minimum distribution (?Ç£RMD?Ç¥) waiver provisions in Section 2203 of the Coronavirus Aid, Relief, and Economic Security Act (the ?Ç£CARES Act?Ç¥). The CARES Act waived the requirement to make RMDs in 2020. Distributed amounts that?Çöbut for the CARES Act waiver?Çöwould have been RMDs are instead treated as eligible rollover distributions. Generally, the deadline to roll over an eligible rollover distribution into an IRA or another qualified plan is 60 days from the distribution date. However, for those eligible rollover distributions made in 2020 that otherwise would have been RMDs and for which the 60-day rollover period expires before August 31, 2020, the IRS extended the rollover deadline to August 31, 2020. Additionally, Notice 2020-51 includes a Q&A relating to the waiver of RMDs in 2020 and a model amendment that plan sponsors can adopt to provide… Continue Reading

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