Required Minimum Distributions

<RULE> DEPARTMENT OF THE TREASURY <SUBAGY>Internal Revenue Service</SUBAGY> <CFR>26 CFR Parts 1, 31, and 54</CFR> <DEPDOC>[TD 10001]</DEPDOC> <RIN>RIN 1545-BP82</RIN> <SUBJECT>Required Minimum Distributions</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Internal Revenue Service (IRS), Treasury. <HD SOURCE="HED">ACTION:</HD> Final regulations. <SUM> <HD SOURCE="HED">SUMMARY:</HD> This document sets forth final regulations relating to required minimum distributions 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. These regulations affect administrators of, and participants in, those plans; owners of individual retirement accounts and annuities; employees for whom amounts are contributed to section 403(b) annuity contracts, custodial accounts, or retirement income accounts; and beneficiaries of those plans, contracts, accounts, and annuities. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> <E T="03">Effective date:</E> These regulations are effective on September 17, 2024. <E T="03">Applicability date:</E> Amended §§ 1.401(a)(9)-1 through 1.401(a)(9)-9, 1.403(b)-6(e), and 1.408-8 apply for purposes of determining required minimum distributions for calendar years beginning on or after January 1, 2025. Amended § 1.402(c)-2 applies for distributions on or after January 1, 2025. Amended § 54.4974-1 applies for taxable years beginning on or after January 1, 2025. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Brandon M. Ford at (202) 317-6700 (not a toll-free number). </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">Background</HD> This document sets forth amendments to the Income Tax Regulations (26 CFR part 1) under section 401(a)(9) of the Internal Revenue Code of 1986 (Code). These regulations address the required minimum distribution requirements for plans qualified under section 401(a) and update the regulations to reflect the amendments made to section 401(a)(9) by sections 114 and 401 of the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), enacted on December 20, 2019, as Division O of the Further Consolidated Appropriations Act, 2020, Public Law 116-94, 133 Stat. 2534 (2019) and by various sections of the SECURE 2.0 Act of 2022 (SECURE 2.0 Act), enacted on December 29, 2022, as Division T of the Consolidated Appropriations Act, 2023, Public Law 117-328, 136 Stat. 4459 (2022). The rules of section 401(a)(9) are adopted by reference in section 408(a)(6) and (b)(3) for individual retirement accounts and individual retirement annuities (collectively, IRAs); section 403(b)(10) for annuity contracts, custodial accounts, and retirement income accounts described in section 403(b) (section 403(b) plans); and section 457(d)(2) for eligible deferred compensation plans. The determination of the required minimum distribution is also relevant for purposes of the related excise tax under section 4974 and the definition of eligible rollover distribution in section 402(c). Accordingly, this document also sets forth conforming amendments to the Income Tax Regulations (26 CFR part 1) under sections 402(c), 403(b), 408, and 457, and to the Pension Excise Tax Regulations (26 CFR part 54) under section 4974. <HD SOURCE="HD2">Section 401(a)(9)—Required Minimum Distributions</HD> Section 401(a)(9) provides rules for distributions from a qualified plan during the life of the employee in section 401(a)(9)(A) and after the death of the employee in section 401(a)(9)(B). The rules set forth a required beginning date for distributions and identify the period over which the employee's entire interest must be distributed. Specifically, section 401(a)(9)(A)(ii) provides that the entire interest of an employee in a qualified plan must be distributed, beginning not later than the employee's required beginning date, in accordance with regulations, over the life of the employee or over the lives of the employee and a designated beneficiary (or over a period not extending beyond the life expectancy of the employee and a designated beneficiary). Section 401(a)(9)(B)(i) provides that, if the employee dies after distributions have begun, the employee's remaining interest must be distributed at least as rapidly as under the distribution method used by the employee as of the date of the employee's death (referred to in this preamble as the “at least as rapidly” rule). Section 401(a)(9)(B)(ii) and (iii) provides that, if the employee dies before required minimum distributions have begun, the employee's interest must either be: (1) distributed within 5years after the death of the employee; or (2) distributed (in accordance with regulations) over the life or life expectancy of the designated beneficiary with the distributions generally beginning not later than 1 year after the date of the employee's death. However, under section 401(a)(9)(B)(iv) (as amended by section 327 of the SECURE 2.0 Act), a surviving spouse may elect to: (1) be treated as if the surviving spouse were the employee for purposes of section 401(a)(9)(B)(iii)(II); (2) wait until the date the employee would have attained the applicable age (as defined in section 401(a)(9)(C)(v)) to begin taking required minimum distributions; and (3) have the beneficiaries of the surviving spouse be treated as beneficiaries of the employee if the surviving spouse dies before distributions to the spouse begin. Section 401(a)(9)(C)(i) (as amended by section 114 of the SECURE Act and further amended by section 107 of the SECURE 2.0 Act) defines the required beginning date for an employee (other than a 5-percent owner or IRA owner) as April 1 of the calendar year following the later of the calendar year in which the employee attains the applicable age or the calendar year in which the employee retires. Section 401(a)(9)(C)(v)(I) provides that in the case of an individual who attains age 72 after December 31, 2022, and age 73 before January 1, 2033, the applicable age is 73. Section 401(a)(9)(C)(v)(II) provides that in the case of an individual who attains age 74 after December 31, 2032, the applicable age is 75. For a 5-percent owner or an IRA owner, the required beginning date is April 1 of the calendar year following the calendar year in which the individual attains the applicable age, even if the individual has not retired. Section 401(a)(9)(C)(iii) provides that certain employees who commence benefits under a defined benefit plan after the year in which they attain age 70 <FR>1/2</FR> must receive an actuarial increase. However, section 401(a)(9)(C)(iv) provides that the actuarial increase requirement does not apply for a governmental plan or for a church plan (as defined in section 401(a)(9)(C)(iv)). Section 401(a)(9)(D) provides that (except in the case of a life annuity) the life expectancy of an employee and the employee's spouse (used to measure the period over which payments must be made) may be redetermined, but not more frequently than annually. Section 401(a)(9)(E)(i) defines the term <E T="03">designated beneficiary</E> as any individual designated as a beneficiary by the employee. Section 401(a)(9)(E)(ii) (which was added to the Code as part of section 401 of the SECURE Act) defines the term <E T="03"> eligible designated beneficiary, </E> with respect to any employee, as any designated beneficiary who, as of the date of the employee's death, is: (1) the surviving spouse of the employee; (2) a child of the employee who has not reached the age of majority (within the meaning of section 401(a)(9)(F)); (3) disabled (within the meaning of section 72(m)(7)); (4) a chronically ill individual (within the meaning of section 7702B(c)(2), subject to certain exceptions); or (5) an individual not described elsewhere in section 401(a)(9)(E)(ii) who is not more than 10 years younger than the employee. Section 401(a)(9)(E)(iii) provides that, subject to the rule in section 401(a)(9)(F), the treatment of an employee's child as an eligible designated beneficiary ends when the child attains the age of majority and that any remaining interest must be distributed within 10 years of that date. Section 401(a)(9)(F) provides that, under regulations, any amount paid to a child is treated as if it had been paid to the surviving spouse if it will become payable to the surviving spouse upon that child reaching the age of majority (or other designated event permitted under regulations). Section 401(a)(9)(G) provides that any distribution required to satisfy the incidental death benefit requirement of section 401(a) is treated as a required minimum distribution. Section 401(a)(9)(H) (which was added to the Code as part of section 401 of the SECURE Act) provides special rules that generally apply to the distribution of an employee's remaining interest in a defined contribution plan after the death of that employee. Specifically, section 401(a)(9)(H)(i) provides that, except in the case of a beneficiary who is not a designated beneficiary, section 401(a)(9)(B)(ii): (1) is applied by substituting 10 years for 5 years; and (2) applies whether or not distributions of the employee's interest have begun in accordance with section 401(a)(9)(A). Section 401(a)(9)(H)(ii) provides that section 401(a)(9)(B)(iii) (permitting payments over the life or life expectancy of the designated beneficiary as an alternative to the 10-year rule) applies only in the case of an eligible designated beneficiary. Section 401(a)(9)(H)(iii) provides that if an eligible designated beneficiary dies before that individual's portion of the employee's interest in the plan has been entirely distributed, then section 401(a)(9)(H)(ii) does not apply to the beneficiary of the eligible designated beneficiary, and the rem ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 531k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━