IRS Announces Targeted RMD Relief for Certain 2021 and 2022 Beneficiary Distributions under SECURE Act

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.