IRS Provides Additional RMD Transition Relief Under SECURE/SECURE 2.0

The IRS on July 14, 2023, issued Notice 2023-54 to provide transition relief for required minimum distributions (RMDs) in connection with the change in required beginning date (RBD) to age 73 under SECURE 2.0, and guidance for certain specified RMDs for 2023.

Transition Relief for Those Born in 1951

Direct Rollover, Notice, and Withholding Relief: Plan administrators and payors who treated a distribution between January 1, 2023, and July 31, 2023, as an RMD that was not eligible for rollover—and thus did not permit a direct rollover, provide a 402(f) notice, or withhold at a 20 percent rate—will not be considered to have failed to meet those requirements for any distribution made to a participant born in 1951 (or that participant’s surviving spouse) that would have been an RMD but for the SECURE 2.0 increase from 72 to 73 for the RBD for RMDs.

Rollover Deadline Extended to September 30, 2023: The rollover deadline for any distribution between January 1, 2023, and July 31, 2023, incorrectly treated as an RMD, as described above, is September 30, 2023, disregarding the normal 60-day limitation.

IRA Relief Granted: For any IRA distribution between January 1, 2023, and July 31, 2023, made to an IRA owner born in 1951 (or that individual’s surviving spouse) that would have been an RMD but for the SECURE 2.0 increase from 72 to 73 for the required beginning date for RMDs, the rollover deadline for that portion of the distribution is September 30, 2023, disregarding the normal 60-day limitation. This rollover is permitted even if the IRA owner or surviving spouse has completed a roll over within the last twelve months but will preclude another roll over distribution in the next twelve months.

Specified RMDs for 2023

The guidance for specified RMDs for 2023 is similar to previous relief announced for certain specified 2021 and 2022 required distributions under IRS Notice 2022-53. Proposed RMD regulations were released in February 2022 that state if an account owner dies on or after their required beginning date, beneficiaries who are subject to the 10-year rule must take annual life expectancy payments during the first nine years.

Defined contribution plans that failed to make life expectancy payments under the 10-year rule to designated beneficiaries will not be treated as failing to satisfy the RMD requirement and the IRS will not enforce the IRC Sec. 4974 excess accumulation penalty tax for designated beneficiaries who do not take their life expectancy payments under the 10-year rule. This specified relief is limited to distributions required to be made in 2023 under the proposed regulations in a defined contribution plan or IRA for a designated beneficiary if

the account owner died on or after their RBD in 2020, 2021, or 2022, and
the designated beneficiary is not taking lifetime or life expectancy payments.

This specified relief also applies to successor beneficiaries of an eligible designated beneficiary if

the eligible designated beneficiary dies in 2020, 2021, or 2022, and
that eligible designated beneficiary was taking lifetime or life expectancy payments.