IRS Delays Applicability of Certain Proposed RMD Rules to 2026

The Internal Revenue Service announced Wednesday that certain portions of future final regulations related to required minimum distributions will not apply until the 2026 distribution calendar year.

The proposed regulatory amendments related to RMDs were proposed to apply beginning January 1, 2025, but in response to concerns raised by commenters that it would be difficult to implement many of the provisions in a timely manner, the IRS decided to extend the applicability date.

The Treasury Department and the IRS published proposed regulations regarding RMDs in the Federal Register on February 24, 2022, which reflected changes made by the Setting Every Community Up for Retirement Enhancement Act of 2019.

When SECURE 2.0 was passed in December 2022, it also included a number of provisions relating to RMDs. After considering comments received in response to SECURE 2.0, the Treasury and IRS determined that certain of those changes could be included in final regulations, but that other changes should be addressed in new proposed regulations.

In July of this year, the Treasury and IRS proposed several regulations to codify changes to RMD rules. The proposals were accompanied by final rules clarifying a new 10-year rule regarding RMD withdrawals and inheritance issues. With the exception of a proposed regulation which concerns the valuation of an annuity contract under the partial annuitization option provided for in Section 204 of SECURE 2.0, the provisions of the 2024 proposed regulations were to apply for the purposes of determining RMDs for calendar years beginning on or after January 1, 2025. That was done so that the RMDs would begin to apply at the same time as the 2024 final regulations.   

The first proposal clarified Section 107 of SECURE 2.0, which raised the RMD age to 73 in 2023 and 75 starting in 2033. This was a drafting error in SECURE 2.0, causing confusion for those born in 1959, as they could have fallen into either RMD category. The IRS clarified in the July proposal that anyone born in 1959 would have an RMD age of 73.

In addition, the IRS proposed that voluntary Roth distributions would not count toward the RMD amount. Under previous rules, Roth IRAs were not subject to pre-death RMDs, but Roth employer-sponsored sources were.

The IRS also proposed that spouses who are designated beneficiaries and who have the option of taking an RMD based on their life expectancy or under the 10-year rule could be defaulted into the life expectancy RMD option if the surviving spouse does not make an explicit election.

More information on the proposed regulations can be found here.

For periods before the applicability date of these amendments, the IRS stated, “taxpayers must apply a reasonable, good-faith interpretation of the statutory provisions underlying the amendments.”