For Individuals,For Plan Sponsors,Washington Perspective,Custom

IRS Notice Offers Flexibility, Relief to RMD Rules

May 13, 2024

Key Takeaways:

  • IRS Notice 2024-35 provides relief on final RMD regulations and the "10-year rule," easing compliance for plan sponsors and beneficiaries.
  • Plan sponsors and beneficiaries gain relief from potential disqualification and excise taxes for failing to make "specified" RMDs, aligning with prior guidance and extending relief through 2024.

On April 16, the Internal Revenue Service (IRS) issued Notice 2024-35 to address changes to certain provisions of the after-death required minimum distribution (RMD) rules as directed by the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. This notice provides valuable flexibility amidst regulatory changes, offering clarity for navigating RMD obligations in the coming years.

The notice provides plan sponsors relief on two fronts: final RMD regulations and the "10-year rule," Final RMD regulations, expected to take effect no earlier than 2025, will determine RMDs for calendar years starting January 1, 2025.

Additionally, relief extends through 2024 regarding the IRS interpretation of the "10-year rule," as outlined in the 2022 proposed RMD regulations –

The 10-year rule extension provides relief to plans which adopted an alternative interpretation, allowing for flexibility in adhering to distribution requirements. Specifically, failure to make a "specified RMD" will not be penalized, nor will the IRS impose excise taxes on plan beneficiaries for such failures. This extension, mirroring prior guidance for 2021-2023, now includes 2024.

The notice defines "specified RMD" for 2024, encompassing distributions required under the proposed regulations’ interpretation of the 10-year rule. This includes beneficiaries of deceased employees who passed away between 2020-2023 and beneficiaries of eligible designated beneficiaries (EDBs) utilizing the "stretch" exception.

For more information on SECURE 2.0 or other retirement policy issues, contact Erica McFarquhar, Deputy General Counsel, or Irica Solomon, Head of Government Affairs.

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