The Internal Revenue Service and Treasury Department released final rules late Thursday updating the required minimum distribution rules for beneficiaries under the 10-year rule. The rules confirm that most IRA beneficiaries must take a distribution in each of the 10 years after the account holder's death, emptying the account in that period.
The final regulations reflect changes made by the Setting Every Community Up for Retirement Enhancement (Secure) and Secure 2.0 Acts affecting retirement plan participants, IRA owners and their beneficiaries.
The final regs relate to RMDs from qualified plans; section 403(b) annuity contracts, custodial accounts, and retirement income accounts; individual retirement accounts and annuities; and certain eligible deferred compensation plans.
While there are "a TON of new rules" with the new IRS guidance, "nothing here is game-changing from a planning perspective," Ben Henry-Moreland, senior financial planning nerd at Kitces.com, said in a LinkedIn post. "The biggest thing — that noneligible designated beneficiaries subject to the '10-year rule' will need to take RMDs each year — is a confirmation of what we already knew."
Treasury and IRS explained that while certain changes were made in response to comments received on the proposed regs issued in 2022, the final regs "generally follow" those proposed regs.
Specifically, Treasury and IRS states that they "reviewed comments suggesting that a beneficiary of an individual who has started required annual distributions should not be required to continue those annual distributions if the remaining account balance is fully distributed within 10 years of the individual's death as required by the SECURE Act."
Treasury and IRS determined that the final regs "should retain the provision in the proposed regulations requiring such a beneficiary to continue receiving annual payments."
'Insanely Complicated'
The final rules, however, make "retirement accounts (even more) insanely complicated to deal with on a practical level," Henry-Moreland added in the LinkedIn post.
