The IRS has issued a revised 2020 Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs), intended to clarify the application of required minimum distribution (RMD) rules under the Setting Every Community Up for Retirement Enhancement Act (SECURE Act).
The explanation of the 10-year rule has been expanded to indicate that, if applicable, the entire balance of the IRA must be withdrawn by December 31 of the year containing the 10th anniversary of the owner’s death, and the beneficiary is allowed, but not required, to take a distribution before that date. The publication notes that the 10-year rule applies if
- the beneficiary is an eligible designated beneficiary who elects the 10-year rule if the owner died before reaching his required beginning date, or
- the beneficiary is a designated beneficiary who is not an eligible designated beneficiary, regardless of whether the owner died before reaching his required beginning date.
An example in the prior version of the publication that was carried forward from 2019 has caused some confusion in that it suggested a required life expectancy distribution where the 10-year rule would have been applicable. This example has been modified to reflect life expectancy payments for an eligible designated beneficiary, and a note has been added clarifying that, if death occurred before the required beginning date and the 10-year rule applies, no distribution is required for any year before the 10th year.
Taken together, the publication appears to suggest that the 10-year rule may not be an option for an eligible designated beneficiary for death on or after the account owner’s required beginning date.
The IRS has indicated that it will soon issue proposed regulations regarding changes made to the RMD rules under the SECURE Act.