Tag Archives: required minimum distributions

Required minimum distributions: IRS proposes updated tables

The Internal Revenue Service (IRS) has issued a proposed rule that would amend the life expectancy and distribution period tables used to calculate required minimum distributions (RMDs) from qualified retirement plans, profit-sharing and stock bonus plans, IRAs and annuities, 403(b) and 457 plans, and certain other tax-favored employer-provided retirement arrangements. The IRS proposes to apply the updated tables after it issues the rule in final form and no sooner than for distributions beginning on or after January 1, 2021. Therefore, RMDs for 2020 are generally not affected and cannot be calculated using the new proposed tables.

The proposed updated tables reflect longer life expectancies for males and females than under current tables, thereby resulting in smaller RMDs and longer payout periods.

For more perspective, read this Milliman Client Action Bulletin.

Pension spring cleaning can start with required minimum distributions

One of the most daunting challenges a pension plan can face is distributing required minimum distributions (RMDs) at a terminated vested participant’s required beginning date (RBD). The RBD is akin to cleaning house for the Internal Revenue Service (IRS) because tax-deferred income must start being taxed by the statutory date. Ostensibly, this income will be taxed in full within the participant’s lifetime.

The fall is the perfect time to take stock of which participants (including alternate payees, spouses, and non-spouse beneficiaries) are required to commence payment by April 1 of the following year. Any corrective actions that need to be taken for those participants who missed their RBDs may be completed before filing Form 5500.

To read more about cleaning up with required minimum distributions, read Jennifer Godwin’s article here.