This past month, the IRS published Notice 2023-54 which provides transition relief for plan administrators, payors, plan participants, IRA owners, and beneficiaries in connection with the change in the required beginning date for required minimum distributions. The required beginning date for RMDs was changed under Sec. 401(a)(9), pursuant to Section 107 of the SECURE 2.0 Act, enacted on Dec. 29, 2022, as Division T of the Consolidated Appropriations Act, 2023. P.L. 117-328. Under the previous rule, the defined required beginning date referred to April 1 of the calendar year following the calendar year in which someone reaches age 72. The new required beginning date is defined by reference to April 1 of the calendar year after the calendar year in which someone reaches the applicable age of 73 or 75, depending on the individual’s date of birth.
The IRS is granting certain relief relating to certain distributions made during 2023 to individuals that were characterized as RMDs but are not actually RMDs as a result of the SECURE 2.0 Act. The relief includes:
a. A payor or plan administrator will not be considered to have failed to satisfy the requirements of IRC Sec. 401(a)(31), 402(f), and 3405(c) merely because of a failure to treat certain distributions as eligible rollover distributions. This relief applies with respect to any distribution made form a plan between January 1, 2023, and July 31, 2023, to a participant born in 1951 (or that participant’s surviving spouse) that would have been an RMD but for the change in the required beginning date under Sec. 107 of the SECURE 2.0 Act.
b. The Treasury & the IRS are extending the 60-day rollover period for distributions not treated by a payer or a plan administrator as eligible rollover distributions to Sept. 30, 2023.
c. The IRS is also extending the 60-day rollover period for certain distributions made to an IRA owner (or the owner’s surviving spouse) by extending the deadline for rolling over that portion of the distribution to Sept 30, 2023. To be subject to this extension, the distributions must have been made between Jan. 1, 2023, and July 31, 2023 to an IRA owner born in 1951 (or the surviving spouse) that would have been RMDs before the required beginning date under section 107.
The notice also provides guidance related to specified RMDs, as defined in the notice for 2023. Under this guidance, a defined contribution plan that failed to make a specified RMD will not be treated as having failed to satisfy Sec. 401(a)(9) minimum distribution rules merely because it did not make the distribution. To the extent a taxpayer did not take a specified RMD, the IRS will not assert that an excise tax is due under Sec. 4974.
