Following the RMD announcement, the IRS released two additional sets of proposed regulations relating to provisions in SECURE 2.0. The first addressed rules governing mandatory automatic enrollment features of 401(k) and 403(b) plans, clarifying, among other points, that all eligible employees (including long term, part time and those who have not affirmatively elected to either participate or opt out) are subject to the requirements. The second covered the new Roth and age 60 to 63 catch-up contributions, noting that the $145,000 (inflation-adjusted) salary used for determining mandatory Roth catch-up contributions should be based on the prior year's FICA wages. |
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IRS Delays Certain RMD Regulations Until 2026
Late last year, the IRS announced a delay in the application of proposed regulations interpreting certain changes to the required minimum distribution (RMD) rules made by the SECURE 2.0 Act of 2022. The IRS originally said the proposed regulations would take effect in 2025 to align with the implementation of other final regulations governing RMDs for beneficiaries of retirement accounts, which were finalized last year. However, due to concerns raised during a September 2024 public hearing and in written comments, the IRS agreed to delay application of the proposed regulations. Final regulations, when issued, are anticipated to apply beginning in 2026. Until that time, the IRS has made clear that taxpayers should make a good faith effort to follow the provisions.
RMD age for account owners born in 1959
When new RMD ages were announced in the SECURE 2.0 Act of 2022, an error in the wording seemed to indicate that those born in 1959 could begin taking RMDs after reaching either age 73 or 75. The proposed regulations clarify that age 73 is the RMD age for people born in 1959.
Roth account distributions
Although the final regulations state that Roth accounts in employer-based retirement plans will not be subject to RMDs (aligning them with the rules governing Roth IRAs), the proposed regulations expand on this rule to specifically state that any amounts distributed from a Roth account will not help fulfill a plan participant's RMD requirement for the year.
Spousal election to be treated as an employee
SECURE 2.0 included a provision allowing a spouse to choose to be treated as an employee and delay RMDs until the employee would have reached RMD age. The proposed regulations provide additional guidance on this rule, specifically noting the following:
- The option is available to sole beneficiary spouses of participants who would have been required to begin RMDs in 2024 or later.
- If the employee dies prior to reaching the required beginning date, the spouse will automatically be treated as the employee. Although a spouse will not automatically be treated as the employee if the employee dies on or after the required beginning date, the terms of the plan can specify the election as the default rule.
- If the surviving spouse dies after his/her RMDs begin, the spouse's beneficiaries will be treated as non-eligible designated beneficiaries subject to the 10-year rule.
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