Defined contribution plan

The IRS has released Notice 2022-53, announcing its intent to issue final regulations related to required minimum distributions (RMDs) that will apply no earlier than the 2023 distribution calendar year.

As previously announced, the IRS issued proposed regulations in February 2022. The proposed regulations clarify distribution requirements when an account owner dies after the required beginning date (RBD). The IRS proposal requires beneficiaries subject to the 10-year rule to deplete their account balance by the end of the year that contains the tenth anniversary of the original account owner’s death, and take annual distributions based on the normal single life expectancy calculation.

As this requirement applies to beneficiaries of such account owners who died in 2020 or later, the IRS acknowledges that beneficiaries were not aware of the requirement to take an RMD in 2021 and, pending the issuance of final regulations, were unsure of the requirements for 2022. Therefore, the IRS provides that a defined contribution plan that failed to make this specified RMD will not be treated as having failed to satisfy the RMD requirements. Additionally, designated beneficiaries of a plan participant or IRA owner who failed to take this specified RMD will not be assessed a missed RMD excise tax.

This specified RMD relief is limited to distributions required to be made in 2021 or 2022 under the new 10-year rule in a defined contribution plan or IRA for a designated beneficiary if

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

The same relief under the new 10-year rule also applies to the beneficiary of an eligible designated beneficiary if

• the eligible designated beneficiary died in 2020 or 2021, and
• that eligible designated beneficiary was taking life expectancy payments.

This guidance provides plan sponsors and beneficiaries with specified RMD relief for 2021 and 2022 while the IRS finalizes its RMD rule for the 2023 distribution year. However, the Notice does not provide any additional guidance on the status of the rest of the proposed RMD rules for the 2022 distribution year. While the proposed RMD regulations required beneficiaries to apply existing rules and a reasonable, good faith interpretation of the proposed rule for 2021, neither the proposed rule or the Notice state such reasonable, good faith interpretation can be applied for 2022. 

The IRS has announced the postponement of certain tax-related deadlines for victims of Hurricane Ian in South Carolina. The tax relief postpones various tax filing deadlines that began on September 25, 2022. Affected individuals and households who reside or have a business anywhere in the state of South Carolina, as well as taxpayers with records located in the covered area that are needed to meet covered deadlines, qualify for relief.

In addition to extending certain tax filing and tax payment deadlines, the relief includes completion of many time-sensitive, tax-related acts described in IRS Revenue Procedure 2018-58 and Treasury Regulation 301.7508A-1(c)(1). Affected taxpayers with a covered deadline on or after September 25, 2022, and before February 15, 2023, will have until February 15, 2023, to complete the acts. This includes filing Form 5500 series returns that are required to be filed on or after September 15, 2022, and before February 15, 2023.

“Affected taxpayer” automatically includes any individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Those who reside or have a business located outside the covered disaster area, but have been affected by the disaster, may contact the IRS to request relief.

The IRS has issued a notice and request for comments related to Form 5558, Application for Extension of Time to File Certain Employee Plan Returns. Form 5558 is a multiple use form for filers to request an extension of time to file

• Form 5500, Annual Return/Report of Employee Benefit Plan series returns,
• Form 8955-SSA, Annual Registration Statement Identifying Separated Participants With Deferred Vested Benefits, and
• Form 5330, Return of Excise Taxes Related to Employee Benefit Plans.

The IRS intends to revise Form 5558 to remove items related to the extension of time to file Form 5330 so that the DOL will be able to electronically collect the form using the EFAST2 system. Tax due for Form 5330 filers currently must be paid with Form 5558 at the time of application for extension, and the DOL EFAST2 system will not collect such IRS tax payments. The IRS further indicates that Form 8868 will be revised to allow extensions for Form 5330 and payment of excise tax due.

Comments are invited on the necessity and utility of the collection of information; accuracy of the agency’s estimate of burden including ways to minimize burden; suggestions for improving the quality, utility, and clarity of the information collected; and cost estimates of implementing the collection. Comments should be submitted on or before December 5, 2022.

The IRS has announced the postponement of certain tax-related deadlines for victims of Hurricane Ian in North Carolina. The tax relief postpones various tax filing deadlines that began on September 28, 2022. Affected individuals and households who reside or have a business anywhere in the state of North Carolina, as well as taxpayers with records located in the covered area that are needed to meet covered deadlines, qualify for relief.

In addition to extending certain tax filing and tax payment deadlines, the relief includes completion of many time-sensitive, tax-related acts described in IRS Revenue Procedure 2018-58 and Treasury Regulation 301.7508A-1(c)(1). Affected taxpayers with a covered deadline on or after September 28, 2022, and before February 15, 2023, will have until February 15, 2023, to complete the acts. This includes filing Form 5500 series returns that are required to be filed on or after September 28, 2022, and before February 15, 2023.

“Affected taxpayer” automatically includes any individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Those who reside or have a business located outside the covered disaster area, but have been affected by the disaster, may contact the IRS to request relief.

The Federal Emergency Management Agency (FEMA) has issued a disaster declaration for North Carolina Hurricane Ian, beginning September 28, 2022.

Employers with qualified retirement plans may allow participants to take hardship distributions if 1) they have incurred expenses and losses because of a FEMA-declared disaster, and 2) their principal residence or place of employment at the time of the disaster is located in an area designated by FEMA as eligible for individual disaster assistance.

If the employer permits hardship distributions for expenses and losses related to a federally declared disaster, participants can check fema.gov/locations to determine if they are located in a disaster area designated for individual assistance.

The IRS may also issue relief related to this disaster for certain tax-related deadlines. Additional information can be found at irs.gov/newsroom/tax-relief-in-disaster-situations and will be announced here if such relief is granted.

Senators Tim Scott (R-SC), and Pat Toomey (R-PA), along with Representative Peter Meijer (R-MI), have introduced the Retirement Savings Modernization Act in the Senate and House respectively. According to a press release, the legislation would enhance retirement savings through access to a wide range of alternative assets and reflect the demands of the modern workforce. The proposal would amend Section 404(a) of ERISA to provide that a fiduciary shall not be liable for a breach of duty solely for recommending, selecting, or monitoring any ‘covered investment’ option for a plan. A list of covered investments is defined as, but is not limited to the following

The IRS has announced the postponement of certain tax-related deadlines for victims of Hurricane Ian in Florida. The tax relief postpones various tax filing deadlines that began on September 23, 2022. Affected individuals and households who reside or have a business anywhere in the state of Florida, as well as taxpayers with records located in the covered area that are needed to meet covered deadlines, qualify for relief.

The Federal Emergency Management Agency (FEMA) has issued a disaster declaration for South Carolina Hurricane Ian, beginning September 25, 2022.

The Federal Emergency Management Agency (FEMA) has issued a disaster declaration for Florida Hurricane Ian, beginning September 23, 2022.

The IRS has announced the postponement of certain tax-related deadlines for victims of severe storm, flooding, and landslides in Alaska. The tax relief postpones various tax filing deadlines that began on September 15, 2022.