Final Regs Provide Guidance on RMD Calculations

Final Regs Provide Guidance on RMD Calculations

Internal Revenue Service

The IRS has published final regulations (T.D. 9930) that provide guidance on the life expectancy and distribution period tables used to calculate required minimum distributions (RMDs) from qualified retirement plans, IRAs and annuities, and other tax-favored employer-provided retirement arrangements. Effective November 12, 2020, the final regs adopt, with changes, proposed regs (<a href="/lr/resolve//2b3mf">REG-132210-18</a>) issued in November 2019. The final regs update the life expectancy and distribution period tables to generally reflect longer life expectancies, which reduces RMDs and allows participants to retain larger amounts in their retirement plans. Comments on the proposed regs addressed the updated life expectancy and distribution period tables, the effective date for the use of the tables, and how often the tables should be updated. Responding to some of those comments, the preamble notes that the final regs use mortality rates that are derived from the 2012 individual annuity mortality basic table because those rates more accurately reflect empirical life expectancy data. After the proposed regs were published, the Setting Every Community Up for Retirement Enhancement Act made two significant changes to section 401(a)(9). Treasury and the IRS will update the rules under that section to take into account those changes and will consider other relevant comments that are beyond the scope of these final regs. The life expectancy and distribution period tables in the final regs have been developed based on mortality rates for 2022. The regs do not provide for automatic updates to the life expectancy and distribution period tables. Treasury and the IRS anticipate that they will review the tables at the earlier of 10 years or whenever a new study of individual annuity mortality experience is published. The life expectancy tables and uniform lifetime table under the final regs apply for distribution calendar years beginning after December 31, 2021. The regs include a transition rule that applies if an employee dies before January 1, 2022, and a specified distribution period. That transition rule applies in three situations described in the preamble, and the regs include an example illustrating the application of the rule. A similar transition rule applies if an employee’s sole beneficiary is their surviving spouse and the spouse dies before January 1, 2022. Those transition rules, under which there is a one-time reset for the relevant life expectancy using the single life table under the regs, recognize that the general population has longer life expectancies than those provided in the former rules. Treasury and the IRS anticipate issuing guidance updating <a href="/lr/resolve//dkvp">Rev. Rul. 2002-62</a>. That update would apply the life expectancy, distribution period, and mortality tables provided in the final regs for purposes of determining substantially equal periodic payments once the regs become effective.

The IRS has published final regulations (T.D. 9930) that provide guidance on the life expectancy and distribution period tables used to calculate required minimum distributions from qualified retirement plans, IRAs and annuities, and other tax-favored employer-provided retirement arrangements.

The IRS has published final regulations (T.D. 9930) that provide guidance on the life expectancy and distribution period tables used to calculate required minimum distributions (RMDs) from qualified retirement plans, IRAs and annuities, and other tax-favored employer-provided retirement arrangements. Effective November 12, 2020, the final regs adopt, with changes, proposed regs (REG-132210-18) issued in November 2019. The final regs update the life expectancy and distribution period tables to generally reflect longer life expectancies, which reduces RMDs and allows participants to retain larger amounts in their retirement plans. Comments on the proposed regs addressed the updated life expectancy and distribution period tables, the effective date for the use of the tables, and how often the tables should be updated. Responding to some of those comments, the preamble notes that the final regs use mortality rates that are derived from the 2012 individual annuity mortality basic table because those rates more accurately reflect empirical life expectancy data. After the proposed regs were published, the Setting Every Community Up for Retirement Enhancement Act made two significant changes to section 401(a)(9). Treasury and the IRS will update the rules under that section to take into account those changes and will consider other relevant comments that are beyond the scope of these final regs. The life expectancy and distribution period tables in the final regs have been developed based on mortality rates for 2022. The regs do not provide for automatic updates to the life expectancy and distribution period tables. Treasury and the IRS anticipate that they will review the tables at the earlier of 10 years or whenever a new study of individual annuity mortality experience is published. The life expectancy tables and uniform lifetime table under the final regs apply for distribution calendar years beginning after December 31, 2021. The regs include a transition rule that applies if an employee dies before January 1, 2022, and a specified distribution period. That transition rule applies in three situations described in the preamble, and the regs include an example illustrating the application of the rule. A similar transition rule applies if an employee’s sole beneficiary is their surviving spouse and the spouse dies before January 1, 2022. Those transition rules, under which there is a one-time reset for the relevant life expectancy using the single life table under the regs, recognize that the general population has longer life expectancies than those provided in the former rules. Treasury and the IRS anticipate issuing guidance updating Rev. Rul. 2002-62. That update would apply the life expectancy, distribution period, and mortality tables provided in the final regs for purposes of determining substantially equal periodic payments once the regs become effective.

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Final Regs Provide Guidance on RMD Calculations