Proposed Rule2024-14543
Required Minimum Distributions+
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
July 19, 2024
Issuing agencies
Treasury DepartmentInternal Revenue Service
Abstract
This document sets forth proposed regulations that would provide guidance relating to required minimum distributions from qualified plans; section 403(b) annuity contracts, custodial accounts, and retirement income accounts; individual retirement accounts and annuities; and eligible deferred compensation plans under section 457. These proposed regulations would affect administrators of, and participants in, those plans; owners of individual retirement accounts and annuities; employees for whom amounts are contributed to section 403(b) annuity contracts, custodial accounts, or retirement income accounts; and beneficiaries of those plans, contracts, accounts, and annuities. This document also provides notice of a public hearing.
Full Text
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<title>Federal Register, Volume 89 Issue 139 (Friday, July 19, 2024)</title>
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[Federal Register Volume 89, Number 139 (Friday, July 19, 2024)]
[Proposed Rules]
[Pages 58644-58653]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-14543]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-103529-23]
RIN 1545-BQ66
Required Minimum Distributions+
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking and notice of public hearing.
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SUMMARY: This document sets forth proposed regulations that would
provide guidance relating to required minimum distributions from
qualified plans; section 403(b) annuity contracts, custodial accounts,
and retirement income accounts; individual retirement accounts and
annuities; and eligible deferred compensation plans under section 457.
These proposed regulations would affect administrators of, and
participants in, those plans; owners of individual retirement accounts
and annuities; employees for whom amounts are contributed to section
403(b) annuity contracts, custodial accounts, or retirement income
accounts; and beneficiaries of those plans, contracts, accounts, and
annuities. This document also provides notice of a public hearing.
DATES: Written or electronic comments must be received by September 17,
2024. A public hearing on this proposed regulation has been scheduled
for September 25, 2024, at 10:00 a.m. ET. Requests to speak and
outlines of topics to be discussed at the public hearing must be
received by September 17, 2024. If no outlines are received by
September 17, 2024, the public hearing will be cancelled.
ADDRESSES: Commenters are strongly encouraged to submit public comments
electronically via the Federal eRulemaking Portal at
<a href="http://www.regulations.gov">www.regulations.gov</a> (indicate IRS and REG-103529-23) by following the
online instructions for submitting comments. Once submitted to the
Federal eRulemaking Portal, comments cannot be edited or withdrawn. The
Department of the Treasury (Treasury Department) and the IRS will
publish for public availability any comment submitted electronically or
on paper to its public docket on <a href="http://www.regulations.gov">www.regulations.gov</a>. Send paper
submissions to: CC:PA:01:PR (REG-103529-23), Room 5203, Internal
Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC
20044.
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
call Brandon M. Ford or Jessica S. Weinberger at (202) 317-6700;
concerning submission of comments, the hearing, and the access code to
attend the hearing by telephone, call Vivian Hayes at (202) 317-6901
(not toll-free numbers) or email <a href="/cdn-cgi/l/email-protection#86f6f3e4eaefe5eee3e7f4efe8e1f5c6eff4f5a8e1e9f0"><span class="__cf_email__" data-cfemail="c3b3b6a1afaaa0aba6a2b1aaada4b083aab1b0eda4acb5">[email protected]</span></a> (preferred).
SUPPLEMENTARY INFORMATION:
Background
This document sets forth proposed amendments to the Income Tax
Regulations (26 CFR part 1) under section 401(a)(9) of the Internal
Revenue Code of 1986 (Code). Section 401(a)(9) sets forth required
minimum distribution rules for plans qualified under section 401(a).
These rules are incorporated by reference in section 408(a)(6) and
(b)(3) for individual retirement accounts and individual retirement
annuities (collectively, IRAs); section 403(b)(10) for annuity
contracts, custodial accounts, and retirement income accounts described
in section 403(b) (section 403(b) plans); and section 457(d)(2) for
eligible deferred compensation plans. The determination of the required
minimum distribution is also relevant for purposes of the related
excise tax under section 4974 and the definition of eligible rollover
distribution in section 402(c).
The Rules and Regulations section of this issue of the Federal
Register includes final regulations that amend the Income Tax
Regulations and Excise Tax Regulations (26 CFR parts 1 and 54) relating
to sections 401(a)(9), 402(c), 403(b), 408, 457, and 4974 (T.D. 10001).
The background section in the preamble to those final regulations (2024
final regulations) describes those provisions.
Explanation of Provisions
A. Overview
These proposed regulations would address various provisions that
were reserved in the 2024 final regulations. These proposed regulations
address sections 107, 202, 204, 302, 325, and 327 of the SECURE 2.0 Act
of 2022 (SECURE 2.0 Act), enacted on December 29, 2022, as Division T
of the Consolidated Appropriations Act, 2023, Public Law 117-328, 136
Stat. 4459 (2022), and certain other issues.
B. Determination of Applicable Age for Employees Born in 1959
The 2024 final regulations include rules for determining an
employee's applicable age, as defined in section 401(a)(9)(C)(v), which
is a component of the determination of the employee's
[[Page 58645]]
required beginning date. Under those rules, which reflect the amendment
to section 401(a)(9)(C) made by section 107 of the SECURE 2.0 Act, an
employee's applicable age varies based on the employee's date of birth.
However, as noted in the preamble to the 2024 final regulations,
employees who were born in 1959 are described in section
401(a)(9)(C)(v)(I) of the Code (which provides that the applicable age
for those employees is age 73) as well as section 401(a)(9)(C)(v)(II)
(which provides that the applicable age for those employees is age 75).
The 2024 final regulations reserve Sec. 1.401(a)(9)-2(b)(2)(v) for
the determination of the applicable age for employees born in 1959, and
these proposed regulations would fill in the reserved paragraph. Under
the proposed regulations, the applicable age for an employee who was
born in 1959 would be age 73.
C. Purchase of Annuity Contract With Portion of Employee's Individual
Account--Rules of Operation for Aggregation Option
The 2024 final regulations include guidance issued pursuant to
section 204 of the SECURE 2.0 Act (relating to the application of
section 401(a)(9) of the Code in a situation in which an employee's
interest in a defined contribution plan is partially annuitized by
using a portion of the employee's individual account to purchase an
annuity contract). Specifically, Sec. 1.401(a)(9)-5(a)(5)(iv) provides
that, in lieu of satisfying section 401(a)(9) separately with respect
to an annuity contract purchased with a portion of the employee's
account and the remaining account balance, a plan may permit an
employee to elect to satisfy section 401(a)(9) for the annuity contract
and that account balance in the aggregate by adding the fair market
value of the contract to the remaining account balance and treating
payments under the annuity contract as distributions from the
employee's individual account. However, the 2024 final regulations
reserve Sec. 1.401(a)(9)-5(a)(5)(v) for rules of operation with
respect to this aggregation option, and these proposed regulations
would fill in the reserved paragraph.
Under proposed Sec. 1.401(a)(9)-5(a)(5)(v), the fair market value
of the annuity contract would be determined as of December 31 of the
calendar year preceding the distribution calendar year. In addition,
beginning with the determination used for the 2026 distribution
calendar year, the determination would have to be made using the
applicable method set forth in Sec. 1.408A-4, Q&A-14(b)(2).\1\
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\1\ Section 1.408A-4, Q&A-14(b)(2) sets forth rules for
determining the fair market value of a traditional IRA that is an
individual retirement annuity if that IRA is converted to a Roth
IRA.
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D. Distributions From Designated Roth Accounts
Section 325 of the SECURE 2.0 Act added a new paragraph (5) to
section 402A(d) of the Code, which provides that the provisions of
section 401(a)(9)(A) (requiring that minimum distributions be paid
during an employee's lifetime) and the incidental death benefit
requirements of section 401(a) do not apply to any designated Roth
account. The 2024 final regulations include limited guidance relating
to the application of that new paragraph.
Specifically, in the case of an employee for whom only a portion of
the employee's account under a defined contribution plan is held in a
designated Roth account described in section 402A(b)(2), Sec.
1.401(a)(9)-5(b)(3) of the 2024 final regulations provides that, for
distribution calendar years up to and including the calendar year that
includes the employee's date of death, amounts held in that designated
Roth account are not taken into account for purposes of determining the
account balance that is used to calculate the required minimum
distribution. However, the 2024 final regulations reserve Sec.
1.401(a)(9)-5(g)(2)(iii) for rules regarding how distributions from a
designated Roth account are treated for purposes of section 401(a)(9),
and these proposed regulations fill in the reserved paragraph.
Under proposed Sec. 1.401(a)(9)-5(g)(2)(iii), a distribution from
a designated Roth account made in a calendar year for which the
employee is required to take a minimum distribution under the plan
would not count towards satisfying that requirement. Consistent with
this rule, the proposed regulations would provide that such a
distribution is not treated as a required minimum distribution for
purposes of Sec. 1.402(c)-2(f). Thus, the distribution could be rolled
over to a Roth IRA if it otherwise meets the requirements to be an
eligible rollover distribution.
E. Corrective Distributions Giving Rise to Reduction or Waiver of the
Section 4974 Excise Tax
The 2024 final regulations include guidance relating to the
application of section 4974(e) (as added to the Code by section 302(b)
of the SECURE 2.0 Act). Specifically, Sec. 54.4974-1(a)(2) provides
that, in the case of a taxpayer who doesn't receive the full required
minimum distribution under any qualified retirement plan (as defined in
section 4974(c) of the Code) or any eligible deferred compensation plan
(as defined in section 457(b)) for a calendar year, the excise tax
under section 4974 is reduced from 25 percent of the shortfall to 10
percent if, by the last day of the correction window, the taxpayer: (1)
receives a corrective distribution from the applicable plan in the
amount of the shortfall; and (2) submits a return reflecting that
reduced tax.
In addition, the 2024 final regulations provide for an automatic
waiver of the section 4974 excise tax associated with a failure by a
beneficiary of an individual to take a required minimum distribution in
the calendar year in which the individual died if that individual had
not already satisfied the minimum distribution requirement for that
year provided that the failure is corrected within a specified period
(generally by the end of the following calendar year). Specifically,
Sec. 54.4974-1(g)(3)(iii) provides for an automatic waiver of the
excise tax under section 4974 if, by the tax filing deadline (including
extensions thereof) for the taxable year of the beneficiary that begins
with or within the calendar year of the individual's death (or, if
later, the last day of the calendar year following that calendar year),
the beneficiary takes a corrective distribution in the amount needed to
satisfy the minimum distribution requirement for the calendar year of
the death of the individual.
The 2024 final regulations reserve Sec. 1.401(a)(9)-5(g)(2)(iv)
for the treatment of corrective distributions that give rise to a
reduction or waiver of the section 4974 excise tax, and these proposed
regulations would fill in that reserved paragraph. Under proposed Sec.
1.401(a)(9)-5(g)(2)(iv), a corrective distribution described in section
4974(e) or Sec. 54.4974-1(g)(3)(iii) would not be taken into account
for purposes of determining whether Sec. 1.401(a)(9)-5 is satisfied
for the calendar year in which the corrective distribution is made.
Thus, under the proposed regulations, if a missed required minimum
distribution is corrected by a distribution made in a subsequent
calendar year, the required minimum distribution for that subsequent
year must be made in addition to the corrective distribution.
Furthermore, under Sec. 1.402(c)-2(f)(1) of the 2024 final
regulations, the corrective distribution is treated as a required
minimum distribution and thus is not eligible for rollover.
These proposed regulations would make a conforming change to Sec.
1.408-
[[Page 58646]]
8(g)(2) under which these corrective distributions would not be taken
into account for purposes of determining whether Sec. 1.408-8 of the
2024 final regulations is satisfied for the calendar year in which the
corrective distribution is made. In addition, because Sec. 1.408-
8(b)(3) of the 2024 final regulations provides that the determination
of whether a distribution from an IRA is a required minimum
distribution (and thus not eligible for rollover pursuant to section
408(d)(3)(E)) is made in the same manner as provided in Sec. 1.402(c)-
2(f) and (j), the treatment under Sec. 1.402(c)-2(f)(1) of the
corrective distribution as a required minimum distribution (and thus
not eligible for rollover) would also apply for purposes of section
408(d)(3)(E).
F. Spousal Election Under Section 327 of the SECURE 2.0 Act
The 2024 final regulations permit a defined contribution plan to
provide that, if an employee participating in the plan dies before the
required beginning date, then an eligible designated beneficiary of the
employee (including the employee's surviving spouse) may elect to
receive the beneficiary's interest under the plan under the 10-year
rule or as annual payments over a period not extending beyond the
beneficiary's life expectancy.\2\ Section 401(a)(9)(B)(iv)(I) through
(III) of the Code, as amended by section 327(a) of the SECURE 2.0 Act,
provides that, if the designated beneficiary of an employee who dies
before the employee's required beginning date is the employee's
surviving spouse, then the spouse may elect to: (1) be treated as if
the surviving spouse were the employee for purposes of the regulations
referred to in section 401(a)(9)(B)(iii)(II) of the Code (providing for
annual payments over the beneficiary's life or life expectancy), (2)
delay commencement of required minimum distributions until the year the
employee would have attained the applicable age (as defined in section
401(a)(9)(C)(v)), and (3) be treated as the employee in the event the
surviving spouse dies before distributions to the spouse begin.\3\
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\2\ If the employee is a participant in a defined benefit plan,
the election is between receiving the beneficiary's interest under a
5-year rule or as annuity payments over the beneficiary's lifetime.
\3\ Section 401(a)(9)(B)(iv)(II) and (III) correspond to section
401(a)(9)(B)(iv)(I) and (II) before the changes made by section
327(a) of the SECURE 2.0 Act.
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Under the 2024 final regulations, if: (1) the employee dies before
the employee's required beginning date; (2) the employee's surviving
spouse is the sole beneficiary of the employee; and (3) that spouse is
subject to the life expectancy rule, then the treatment described in
section 401(a)(9)(B)(iv)(II) and (III) will apply automatically (that
is, a separate election is not required). See Sec. 1.401(a)(9)-3(d)
and (e) of the 2024 final regulations.
Section 327(b) of the SECURE 2.0 Act instructs the Secretary to
modify the regulations applicable to defined contribution plans under
section 401(a)(9) of the Code so that an election under section
401(a)(9)(B)(iv) by the surviving spouse will extend the distribution
period in the case of an employee's death after the required beginning
date. In accordance with this instruction, Sec. 1.401(a)(9)-5(g)(3)(i)
of the 2024 final regulations provides that a defined contribution plan
may permit a surviving spouse who is the sole beneficiary of the
employee to elect to be treated as the employee for purposes of
determining the required minimum distribution for a calendar year. The
2024 final regulations reserve Sec. 1.401(a)(9)-5(g)(3)(ii) for rules
relating to this election, and these proposed regulations would fill in
that reserved paragraph.
Proposed Sec. 1.401(a)(9)-5(g)(3)(ii) provides a series of rules
that would apply with respect to the spousal election described in
Sec. 1.401(a)(9)-5(g)(3)(i) of the 2024 final regulations. Under the
proposed regulations, if the employee dies before the required
beginning date and the sole beneficiary of the employee is the
surviving spouse who is subject to the life expectancy rule, then the
spouse would automatically be treated as making the election described
in section 401(a)(9)(B)(iv). As a result, the proposed regulations
provide that section 401(a)(9)(B)(iv)(I) (under which the spouse is
treated as the employee for purposes of section 401(a)(9)(B)(iii)(II))
would apply automatically in this case (in addition to the automatic
application of sections 401(a)(9)(B)(iv)(II) and (III)). If the
employee dies on or after the required beginning date, then the
corresponding election under section 327(b) of the SECURE 2.0 Act does
not apply automatically. However, these proposed regulations would
provide that this corresponding election may be the default election
under the terms of a plan (so that the surviving spouse need not take
any action to have this election apply).
If the election under Sec. 1.401(a)(9)-5(g)(3)(i) is in effect for
a surviving spouse, then, regardless of whether the employee died
before, on, or after the required beginning date, the proposed
regulations provide that the applicable denominator used for
determining the required minimum distribution for each distribution
calendar year up to and including the calendar year that includes the
surviving spouse's date of death would be determined using the Uniform
Lifetime Table (rather than the Single Life Table) for the surviving
spouse's age as of the surviving spouse's birthday in the distribution
calendar year.\4\ In accordance with Sec. 1.401(a)(9)-5(d)(1)(i) of
the 2024 final regulations, the required minimum distribution for the
calendar year of the surviving spouse's death must be made to a
beneficiary of the surviving spouse to the extent it has not already
been distributed to the surviving spouse.
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\4\ However, if the employee dies on or after the employee's
required beginning date and the employee's remaining life expectancy
is greater than the applicable denominator determined under the
Uniform Lifetime Table for the surviving spouse's age (which would
occur only if the surviving spouse was more than ten years older
than the employee), then that greater life expectancy is used as the
applicable denominator.
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These proposed regulations provide that, if the election described
in Sec. 1.401(a)(9)-5(g)(3)(i) is in effect for the surviving spouse
and the spouse dies on or after the date on which distributions are
considered to have begun to the spouse under the rules of Sec.
1.401(a)(9)-3(e)(3) of the 2024 final regulations (that is, the end of
the calendar year in which the employee would have reached the
applicable age), then annual distributions to the spouse's beneficiary
would have to continue. Those distributions would be determined using
the spouse's remaining life expectancy for the spouse's age as of the
spouse's birthday in the calendar year of the spouse's death from the
Single Life Table, reduced by one for each subsequent calendar year. In
addition, the proposed regulations add a conforming sentence to Sec.
1.401(a)(9)-4(e)(8), providing that the spouse's beneficiary would not
be an eligible designated beneficiary in this situation. As a result, a
final distribution of the employee's interest would have to be made by
the end of the calendar year that includes the tenth anniversary of the
spouse's death.
Under the proposed regulations, the spousal election described in
Sec. 1.401(a)(9)-5(g)(3)(i) would be available only if the first year
for which annual required minimum distributions to the surviving spouse
must be made is 2024 or later. For example, if an employee who died in
2017 and before the employee's required beginning date would have
reached the applicable age in 2024 or later, then the first year for
which an annual required minimum distribution is due would be 2024 or
[[Page 58647]]
later, and the spousal election could apply. However, if the employee
would have reached the applicable age in 2022, then the first year for
which an annual required minimum distribution is due to the spouse was
2022, and the spousal election would not be available. Similarly, if
the employee died in 2021 and after the employee's required beginning
date, then the spouse must begin receiving annual required minimum
distributions (based on the spouse's remaining life expectancy) in
2022, and the spousal election would not be available.
Although an election under section 401(a)(9)(B)(iv) of the Code
results in the spouse being treated as the employee for purposes of the
regulations referred to in section 401(a)(9)(B)(iii)(II) (that is,
Sec. 1.401(a)(9)-5), that treatment does not extend to other
purposes.\5\ For example, the spouse would not be subject to the 10
percent additional tax under section 72(t)(2)(A)(ii) even if the spouse
takes a distribution before attaining age 59\1/2\. Similarly, the date
by which the surviving spouse must commence distributions is determined
by reference to the employee's attainment of the applicable age (rather
than by reference to the spouse's attainment of the applicable age
\6\). In addition, for purposes of determining the account balance
under a plan while the surviving spouse is taking distributions, Sec.
1.401(a)(9)-5(b)(3) of the 2024 final regulations (which excludes
amounts held in a designated Roth account from the employee's account
balance during the employee's lifetime) does not apply. Thus, all
amounts held in a designated Roth account and any other account under
the plan are included for purposes of determining the required minimum
distribution due under the plan for the calendar year.
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\5\ However, if the spouse dies before distributions have begun,
then in accordance with section 401(a)(9)(B)(iv)(III), the spouse is
treated as the employee for purposes of determining the beneficiary
designated under the plan. In addition, if the spouse executes a
spousal rollover to the spouse's own IRA in accordance with section
402(c)(9) after having made the election described in section
401(a)(9)(B)(iv), then the spouse will not be treated as a
beneficiary with respect to any amounts in that IRA.
\6\ The election under section 401(a)(9)(B)(iv) does not affect
the ability of the employee's surviving spouse to make a rollover to
the spouse's own IRA or to treat an IRA as the surviving spouse's
own IRA. In either of these cases, the date by which distributions
from that IRA must commence would be determined by reference to the
surviving spouse's attainment of the applicable age.
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These proposed regulations also provide an updated Uniform Lifetime
Table that provides the applicable denominator for individuals ages 10
through 120+. This table was originally published in Notice 2022-6,
2022-5 IRB 460, relating to the determination of whether a series of
payments is considered a series of substantially equal periodic
payments.
Section 1.402(c)-2(j)(4) of the 2024 final regulations sets forth a
special rule under which a portion of a distribution to certain
surviving spouses (that is, the portion of the distribution that
represents a catch-up of missed hypothetical required minimum
distributions) is treated as a required minimum distribution that is
not eligible for rollover. Section 1.402(c)-2(j)(4)(iii), which
provides rules for the calculation of the hypothetical required minimum
distributions, includes the assumption that the election in Sec.
1.401(a)(9)-5(g)(3)(i) was in effect for the spouse. The 2024 final
regulations reserve Sec. 1.402(c)-2(j)(4)(vii) for an example of the
calculation of the hypothetical required minimum distributions, and
proposed Sec. 1.402(c)-2(j)(4)(vii) would fill in the reserved
paragraph with an example of the calculation of the hypothetical
required minimum distributions over multiple years, which reflects the
use of the Uniform Lifetime Table.
The proposed regulations do not include any changes to the defined
benefit rules of Sec. 1.401(a)(9)-6 to reflect the amendment to
section 401(a)(9)(B)(iv) made by section 327 of the SECURE 2.0 Act.
Comments are requested on whether there are circumstances under which
that provision would affect the required minimum distribution rules
applicable to defined benefit plans.
G. Divorce After Purchase of Qualifying Longevity Annuity Contract
Section 202(a)(3) of the SECURE 2.0 Act instructs the Secretary of
the Treasury (or that person's delegate) to amend Sec. 1.401(a)(9)-6
to provide that, in the case of a qualifying longevity annuity contract
(QLAC) which was purchased with joint and survivor annuity benefits for
an individual and the individual's spouse, a divorce occurring after
the original purchase and before the date that the annuity payments
commence under the contract will not affect the permissibility of the
joint and survivor benefits if certain conditions related to an
associated qualified domestic relations order (QDRO) described in
section 414(p) of the Code are met. Section 202(a)(3) of the SECURE 2.0
Act also provides that if the arrangement is not subject to section
414(p) of the Code or section 206(d) of the Employee Retirement Income
Security Act of 1974,\7\ a divorce or separation instrument may be
substituted for a QDRO. The 2024 final regulations reserve Sec.
1.401(a)(9)-6(q)(3)(vii)(B) for rules related to this divorce or
separation instrument alternative, and these proposed regulations would
fill in the reserved paragraph.
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\7\ The Employee Retirement Income Security Act of 1974, Public
Law 93-406, 88 Stat. 829, as amended, is referred to in this
preamble as ``ERISA.''
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Under proposed Sec. 1.401(a)(9)-6(q)(3)(vii)(B), the divorce or
separation instrument alternative would be available only if the plan
is not subject to both section 414(p) of the Code and section 206(d) of
ERISA (for example, a governmental plan described in section 414(d) of
the Code). In accordance with section 202(b) of the SECURE 2.0 Act,
these proposed regulations would provide that, for purposes of this
alternative, a divorce or separation instrument is: (1) a decree of
divorce or separate maintenance or a written instrument incident to
such a decree; (2) a written separation agreement; or (3) any other
decree requiring an individual to make payments for the support or
maintenance of the individual's former spouse.
H. Outright Distribution to Trust Beneficiary
The 2024 final regulations provide rules for the separate
application of section 401(a)(9) of the Code with respect to multiple
beneficiaries of a see-through trust (within the meaning of Sec.
1.401(a)(9)-4(f)(1)). Specifically, Sec. 1.401(a)(9)-8(a) of the 2024
final regulations permits separate application of section 401(a)(9)
with respect to each of the beneficiaries' separate interests if the
terms of a see-through trust meet certain requirements. One of those
requirements is that the trust must provide that it is to be divided
immediately upon the death of the employee, with the separate interests
to be held in separate see-through trusts.
Proposed Sec. 1.401(a)(9)-8(a)(1)(iii)(B) sets forth an exception
to that requirement in the case of an outright distribution to a trust
beneficiary, as described in proposed Sec. 1.401(a)(9)-
8(a)(1)(iii)(D). Under the proposed regulations, the rules under Sec.
1.401(a)(9)-8(a)(1)(iii)(C) of the 2024 final regulations (prohibiting
discretion in the allocation of post-death distributions attributable
to the employee's interest in the plan) would be extended to apply when
that outright distribution exception is used.
Under proposed Sec. 1.401(a)(9)-8(a)(1)(iii)(D), the separate
interests of
[[Page 58648]]
the beneficiaries held in a see-through trust would not fail to be
eligible for the exception in proposed Sec. 1.401(a)(9)-
8(a)(1)(iii)(B) merely because, upon termination of that trust, a
beneficiary's separate interest in the trust is to be held directly by
that beneficiary rather than being held by a separate see-through
trust. Thus, for example, if a trust which is a named beneficiary
provides that each of three children have equal interests in the
portion of the trust attributable to the employee's interest in the
plan, and the trust provides that it is to be immediately divided upon
the death of the employee, then section 401(a)(9) is permitted to be
applied separately with respect to the separate interests of the three
children, even if the separate interest of one of the children is held
by a sub-trust while the separate interests of the other children are
held directly by those children.
Applicability Dates
The amendments to Sec. Sec. 1.401(a)(9)-4, 1.401(a)(9)-5,
1.401(a)(9)-6, 1.401(a)(9)-8, 1.401(a)(9)-9, and 1.408-8 are proposed
to apply for purposes of determining required minimum distributions for
calendar years beginning on or after January 1, 2025. The amendments to
Sec. 1.402(c)-2 are proposed to apply for distributions on or after
January 1, 2025. Thus, these amendments would have the same
applicability dates as the corresponding provisions in the 2024 final
regulations.
Special Analyses
I. Regulatory Planning and Review
Pursuant to the Memorandum of Agreement, Review of Treasury
Regulations under Executive Order 12866 (June 9, 2023), tax regulatory
actions issued by the IRS are not subject to the requirements of
section 6 of Executive Order 12866, as amended. Therefore, a regulatory
impact assessment is not required.
II. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) generally
requires that a Federal agency obtain the approval of the Office of
Management and Budget (OMB) before collecting information from the
public, whether such collection of information is mandatory, voluntary,
or required to obtain or retain a benefit. An agency may not conduct or
sponsor, and a person is not required to respond to, a collection of
information unless the collection of information displays a valid
control number.
These proposed regulations include third-party disclosures and
recordkeeping requirements, in sections 1.401(a)(9)-5(a)(5)(iv) and
1.401(a)(9)-5(g)(3)(ii), that are required to determine the required
minimum distribution for a calendar year for certain defined
contribution plan participants and beneficiaries. These collections of
information would generally be used by the IRS for tax compliance
purposes and plan administrators to facilitate compliance with the
required minimum distribution requirements under section 401(a)(9) of
the Code. The likely respondents to these collections are employees
participating in retirement plans and their beneficiaries.
The 2024 final regulations include guidance relating to the
application of section 401(a)(9) in a situation in which an employee's
interest in a defined contribution plan is partially annuitized by
using a portion of the employee's account to purchase an annuity
contract. Specifically, section 1.401(a)(9)-5(a)(5)(iv) of the final
regulations provides that, in lieu of satisfying section 401(a)(9)
separately with respect to an annuity contract purchased with a portion
of an employee's defined contribution plan account and the remaining
account balance, a plan may permit an employee to elect to satisfy
section 401(a)(9) for the annuity contract and the remaining account
balance in the aggregate by adding the fair market value of the
contract to the remaining account balance and treating payments under
the annuity contract as distributions from the individual account.
Section 1.401(a)(9)-5(a)(5)(v) of the proposed regulations provides
rules of operation with respect to this aggregation option--
specifically, the method and date for valuation of the annuity
contract. Under these rules of operation, annuity contract issuers are
expected to provide the annuity valuations as a third-party disclosure.
In addition, the amount of payments made under the annuity contract and
the underlying value of the annuity contract is expected to be reported
to the employer as a third-party disclosure. The associated burden is
as follows:
Estimated number of respondents: 19,620.
Estimated average annual burden per respondent: 0.5 hours (30
minutes).
Estimated frequency of responses: Once.
Estimated total annual reporting burden: 9,810 hours.
Section 1.401(a)(9)-5(g)(3)(i) of the 2024 final regulations \8\
provides that a plan may permit a surviving spouse who is the sole
beneficiary of an employee to elect to be treated as the employee for
purposes of determining the required minimum distribution from a
defined contribution plan for a calendar year. Section 1.401(a)(9)-
5(g)(3)(ii) of these proposed regulations supplements that provision by
providing a series of rules that would apply with respect to the
spousal election described in the preceding sentence. Under these
proposed regulations, if the employee dies before the employee's
required beginning date and the sole beneficiary of the employee is the
surviving spouse who is subject to the life expectancy rule, then the
spouse would automatically be treated as making the election. If the
employee dies on or after the required beginning date, then the
election would not apply automatically. However, the proposed
regulations provide that the election may be the default under the
terms of a plan (so that the surviving spouse need not take any action
to have the election apply). This election is expected to be made as a
third-party disclosure between the surviving spouse and the plan
administrator, who will keep records of the election. The associated
burden is as follows:
---------------------------------------------------------------------------
\8\ These proposed regulations are being published
simultaneously with the 2024 final regulations, and address various
provisions that were reserved in those regulations. The collection
requirements in the 2024 final regulations are approved under OMB
control number 1545-1573.
---------------------------------------------------------------------------
Estimated number of respondents: 156,960.
Estimated average annual burden per respondent: 0.17 hours (10
minutes).
Estimated frequency of responses: Once.
Estimated total annual reporting burden: 26,683 hours.
The collections of information contained in this notice of proposed
rulemaking have been submitted to the Office of Management and Budget
for review in accordance with the Paperwork Reduction Act. Commenters
are strongly encouraged to submit public comments electronically.
Written comments and recommendations for the proposed information
collection should be sent to <a href="http://www.reginfo.gov/public/do/PRAMain">www.reginfo.gov/public/do/PRAMain</a>, with
copies to the Internal Revenue Service. Find this particular
information collection by selecting ``Currently under Review--Open for
Public Comments'' and using the search function. Submit electronic
submissions for the proposed information collection to the IRS via
email at <a href="/cdn-cgi/l/email-protection#f6868497d895999b9b93988285b69f8485d8919980"><span class="__cf_email__" data-cfemail="9fefedfeb1fcf0f2f2faf1ebecdff6edecb1f8f0e9">[email protected]</span></a> (indicate REG-103529-23 on the Subject
line). Comments on the collection of information should be received by
September 17, 2024. Comments are specifically requested
[[Page 58649]]
concerning: whether the proposed collection of information is necessary
for the proper performance of the functions of the IRS, including
whether the information will have practical utility; the accuracy of
the estimated burden associated with the proposed collection of
information; how the quality, utility, and clarity of the information
to be collected may be enhanced; how the burden of complying with the
proposed collection of information may be minimized, including through
the application of automated collection techniques or other forms of
information technology; and estimates of capital or start-up costs and
costs of operation, maintenance, and purchase of services to provide
information.
III. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it
is hereby certified that these proposed regulations will not have a
significant economic impact on a substantial number of small entities.
These proposed regulations would affect individuals and businesses,
some of which may be small entities. The rule affects administrators
of, and participants in, certain plans; owners of individual retirement
accounts and annuities; employees for whom amounts are contributed to
section 403(b) annuity contracts, custodial accounts, or retirement
income accounts; and beneficiaries of those plans, contracts, accounts,
and annuities. These proposed regulations do not impose new compliance
burdens and are not expected to result in economically meaningful
changes in behavior relative to the existing regulations. It is
expected that most plans will provide the spousal election under Sec.
1.401(a)(9)-5(g)(3) as a default election under the plan and that
surviving spouses will rarely opt out of the default (because of the
tax benefit of the default election). Therefore, the economic impact of
the rule is not expected to be significant.
Notwithstanding this certification that the proposed regulations
would not have a significant economic impact on a substantial number of
small entities, the Treasury Department and the IRS invite comments on
the impacts these proposed regulations may have on small entities.
Pursuant to section 7805(f) of the Code, these proposed regulations
will be submitted to the Chief Counsel for Advocacy of the Small
Business Administration for comment on their impact on small
businesses.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 requires
that agencies assess anticipated costs and benefits and take certain
other actions before issuing a final rule that includes any Federal
mandate that may result in expenditures in any one year by a State,
local, or tribal government, in the aggregate, or by the private
sector, of $100 million in 1995 dollars, updated annually for
inflation. The proposed regulations do not propose any rule that would
include any Federal mandate that may result in expenditures by State,
local, or tribal governments, or by the private sector, in excess of
that threshold.
V. Executive Order 13132: Federalism
Executive Order 13132 (Federalism) prohibits an agency from
publishing any rule that has federalism implications if the rule either
imposes substantial, direct compliance costs on State and local
governments, and is not required by statute, or preempts State law,
unless the agency meets the consultation and funding requirements of
section 6 of the Executive order. The proposed regulations do not
propose rules that would have federalism implications, impose
substantial direct compliance costs on State and local governments, or
preempt State law within the meaning of the Executive order.
Comments and Public Hearing
Before these proposed amendments to the regulations are adopted as
final regulations, consideration will be given to comments regarding
the notice of proposed rulemaking that are submitted timely to the IRS
as prescribed in the preamble under the ADDRESSES section. The Treasury
Department and the IRS request comments on all aspects of the proposed
regulation. All comments will be made available at <a href="http://www.regulations.gov">www.regulations.gov</a>.
Once submitted to the Federal eRulemaking Portal, comments cannot be
edited or withdrawn.
A public hearing has been scheduled for September 25, 2024,
beginning at 10:00 a.m. ET in the Auditorium of the Internal Revenue
Building, 1111 Constitution Avenue NW, Washington, DC. Due to building
security procedures, visitors must enter at the Constitution Avenue
entrance. In addition, all visitors must present photo identification
to enter the building. Because of access restrictions, visitors will
not be admitted beyond the immediate entrance area more than 30 minutes
before the hearing starts. Participants may alternatively attend the
public hearing by telephone.
The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who
wish to present oral comments must submit an outline of the topics to
be addressed and the time to be devoted to each topic by September 17,
2024. A period of 10 minutes will be allocated to each person for
making comments. An agenda showing the scheduling of the speakers will
be prepared after the deadline for receiving outlines has passed.
Copies of the agenda will be available free of charge at the hearing.
If no outline of the topics to be discussed at the hearing is received
by September 17, 2024, the public hearing will be cancelled. If the
public hearing is cancelled, a notice of cancellation of the public
hearing will be published in the Federal Register.
Individuals who want to testify in person at the public hearing
must send an email to <a href="/cdn-cgi/l/email-protection#e8989d8a84818b808d899a81868f9ba8819a9bc68f879e"><span class="__cf_email__" data-cfemail="95e5e0f7f9fcf6fdf0f4e7fcfbf2e6d5fce7e6bbf2fae3">[email protected]</span></a> to have your name added to
the building access list. The subject line of the email must contain
the regulation number REG-103529-23 and the language TESTIFY In Person.
For example, the subject line may say: Request to TESTIFY In Person at
Hearing for REG-103529-23.
Individuals who want to testify by telephone at the public hearing
must send an email to <a href="/cdn-cgi/l/email-protection#7a0a0f18161319121f1b0813141d093a130809541d150c"><span class="__cf_email__" data-cfemail="dcaca9beb0b5bfb4b9bdaeb5b2bbaf9cb5aeaff2bbb3aa">[email protected]</span></a> to receive the telephone
number and access code for the hearing. The subject line of the email
must contain the regulation number REG-103529-23 and the language
TESTIFY Telephonically. For example, the subject line may say: Request
to TESTIFY Telephonically at Hearing for REG-103529-23.
Individuals who want to attend the public hearing in person without
testifying must also send an email to <a href="/cdn-cgi/l/email-protection#80f0f5e2ece9e3e8e5e1f2e9eee7f3c0e9f2f3aee7eff6"><span class="__cf_email__" data-cfemail="d3a3a6b1bfbab0bbb6b2a1babdb4a093baa1a0fdb4bca5">[email protected]</span></a> to have
your name added to the building access list. The subject line of the
email must contain the regulation number REG-103529-23 and the language
ATTEND In Person. For example, the subject line may say: Request to
ATTEND Hearing In Person for REG-103529-23. Requests to attend the
public hearing must be received by 5:00 p.m. ET on September 23, 2024.
Individuals who want to attend the public hearing by telephone
without testifying must also send an email to <a href="/cdn-cgi/l/email-protection#bbcbced9d7d2d8d3dedac9d2d5dcc8fbd2c9c895dcd4cd"><span class="__cf_email__" data-cfemail="a8d8ddcac4c1cbc0cdc9dac1c6cfdbe8c1dadb86cfc7de">[email protected]</span></a> to
receive the telephone number and access code for the hearing. The
subject line of the email must contain the regulation number REG-
103529-23 and the language ATTEND Hearing Telephonically. For example,
the subject line may say: Request to ATTEND Hearing Telephonically for
[[Page 58650]]
REG-103529-23. Requests to attend the public hearing must be received
by 5:00 p.m. ET on September 23, 2024.
Hearings will be made accessible to people with disabilities. To
request special assistance during the hearing, please contact the
Publications and Regulations Branch of the Office of Associate Chief
Counsel (Procedure and Administration) by sending an email to
<a href="/cdn-cgi/l/email-protection#512124333d383239343023383f3622113823227f363e27"><span class="__cf_email__" data-cfemail="b7c7c2d5dbded4dfd2d6c5ded9d0c4f7dec5c499d0d8c1">[email protected]</span></a> (preferred) or by telephone at (202) 317-6901
(not a toll-free number) by September 20, 2024.
Statement of Availability of IRS Documents
IRS Revenue Procedures, Revenue Rulings notices, and other guidance
cited in this document are published in the Internal Revenue Bulletin
(or Cumulative Bulletin) and are available from the Superintendent of
Documents, U.S. Government Publishing Office, Washington, DC 20402, or
by visiting the IRS website at <a href="http://www.irs.gov">http://www.irs.gov</a>.
Drafting Information
The principal authors of these proposed regulations are Jessica S.
Weinberger and Brandon M. Ford, of the Office of the Associate Chief
Counsel (Employee Benefits, Exempt Organizations, and Employment
Taxes). However, other personnel from the Treasury Department and the
IRS participated in the development of the proposed regulations.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, the Treasury Department and the IRS propose to amend
26 CFR part 1 as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 continues to read, in
part, as follows:
Authority: 26 U.S.C. 7805 * * *
* * * * *
0
Par. 2. Section 1.401(a)(9)-2, as revised in a final rule published
elsewhere in this issue of the Federal Register, effective September
17, 2024, is amended by adding paragraph (b)(2)(v) to read as follows:
Sec. 1.401(a)(9)-2 Distributions commencing during an employee's
lifetime.
* * * * *
(b) * * *
(2) * * *
(v) Employees born in 1959. In the case of an employee born in
1959, the applicable age is age 73.
* * * * *
0
Par. 3. Section 1.401(a)(9)-4, as revised in a final rule published
elsewhere in this issue of the Federal Register, effective September
17, 2024, is amended by adding a sentence to the end of paragraph
(e)(8) to read as follows:
Sec. 1.401(a)(9)-4 Determination of the designated beneficiary.
* * * * *
(e) * * *
(8) * * * However, if the surviving spouse dies after benefits are
considered to have commenced under Sec. 1.401(a)(9)-3(e)(3), then the
beneficiary of the spouse is not an eligible designated beneficiary.
* * * * *
0
Par. 4. Section 1.401(a)(9)-5, as revised in a final rule published
elsewhere in this issue of the Federal Register, effective September
17, 2024, is amended by:
0
a. Revising paragraph (a)(5)(iv)(A);
0
b. Revising paragraph (a)(5)(v); and
0
c. Adding paragraphs (g)(2)(iii) and (iv), and (g)(3)(ii).
The revision and additions read as follows:
Sec. 1.401(a)(9)-5 Required minimum distributions from defined
contribution plans.
(a) * * *
(5) * * *
(iv) * * *
(A) Adding the fair market value of the contract (determined in
accordance with paragraph (a)(5)(v) of this section) to the remaining
account balance determined under paragraph (b) of this section; and
* * * * *
(v) Rules of operation for aggregation option. For purposes of
applying the optional aggregation rule described in paragraph
(a)(5)(iv) of this section, the fair market value of the annuity
contract is determined as of December 31 of the calendar year preceding
the distribution calendar year. Beginning with the determination used
for the 2026 distribution calendar year, the applicable method set
forth in Sec. 1.408A-4, Q&A-14(b)(2) must be used for this purpose.
* * * * *
(g) * * *
(2) * * *
(iii) Distributions from designated Roth accounts. For distribution
calendar years up to and including the calendar year that includes the
employee's date of death, distributions from a designated Roth account
(as described in section 402A(b)(2)) are not taken into account for
purposes of determining whether this section is satisfied.
(iv) Corrective distributions that give rise to reduction or waiver
of section 4974 excise tax. A corrective distribution described in
section 4974(e) or Sec. 54.4974-1(g)(3)(iii) is not taken into account
for purposes of determining whether this section is satisfied for the
calendar year in which the distribution is made. Thus, for the year in
which the corrective distribution is made, the required minimum
distribution for that year must be made in addition to the corrective
distribution.
(3) * * *
(ii) Rules relating to election--(A) Employee dies before required
beginning date. If the employee dies before the employee's required
beginning date, Sec. 1.401(a)(9)-3(c)(4) applies to the designated
beneficiary (under which life expectancy payments will be made to the
employee's designated beneficiary), and the designated beneficiary is
the employee's surviving spouse who is eligible to make the election
described in paragraph (g)(3)(i) of this section, then the spouse is
treated as having made that election.
(B) Employee dies on or after required beginning date. If the
employee dies on or after the employee's required beginning date, the
spouse is not automatically treated as having made the election
described in paragraph (g)(3)(i) of this section. However, that
election may be a default election under the terms of the plan.
(C) Use of Uniform Lifetime Table. If the election described in
paragraph (g)(3)(i) of this section applies with respect to a surviving
spouse, then the applicable denominator for each distribution calendar
year beginning with the calendar year following the year of the
employee's death and up to and including the calendar year that
includes the surviving spouse's date of death is determined using the
Uniform Lifetime Table in Sec. 1.401(a)(9)-9(c) for the surviving
spouse's age as of the surviving spouse's birthday in the distribution
calendar year. However, if the employee died on or after the required
beginning date, then the applicable denominator for a distribution
calendar year is the greater of the applicable denominator determined
under the preceding sentence and the employee's remaining life
expectancy.
(D) Distribution after spouse's death. If the election described in
paragraph (g)(3)(i) of this section applies with respect to an employee
who dies on or after the required beginning date (or
[[Page 58651]]
whose surviving spouse dies after distributions are considered to have
begun to the spouse as determined under Sec. 1.401(a)(9)-3(e)(3)),
then--
(1) For calendar years following the calendar year that includes
the surviving spouse's date of death, the applicable denominator used
for determining the required minimum distribution for each distribution
calendar year is determined under the rules of paragraph (d)(3)(iv) of
this section, and
(2) A final distribution of the employee's entire interest must be
made by the end of the calendar year that includes the tenth
anniversary of the surviving spouse's death.
(E) Applicability dates for spousal election. The spousal election
described in paragraph (g)(3)(i) of this section applies only if the
first year for which annual required minimum distributions to the
surviving spouse must be made is 2024 or later. Thus, the election
described in paragraph (g)(3)(ii)(A) of this section (relating to
employees who die before the required beginning date) applies only if
the calendar year in which life expectancy payments must begin under
Sec. 1.401(a)(9)-3(d) is 2024 or later. Similarly, the election
described in paragraph (g)(3)(ii)(B) of this section (relating to an
employee who dies on or after the required beginning date) applies only
if the first year for which the surviving spouse must take annual
required minimum distributions under paragraph (d) of this section is
2024 or later (that is, if the employee died in 2023 or later).
0
Par. 5. Section 1.401(a)(9)-6, as revised in a final rule published
elsewhere in this issue of the Federal Register, effective September
17, 2024, is amended by adding paragraph (q)(3)(vii)(B) to read as
follows:
Sec. 1.401(a)(9)-6 Required minimum distributions for defined benefit
plans and annuity contracts.
* * * * *
(q) * * *
(3) * * *
(vii) * * *
(B) QDRO not required for certain plans. If the rules of section
414(p) and section 206(d)(3) of ERISA do not apply to a plan (for
example, a governmental plan described in section 414(d) of the Code),
then a divorce or separation instrument that satisfies the requirements
of paragraph (q)(3)(vii)(C) of this section may be used in lieu of a
qualified domestic relations order. For this purpose, a divorce or
separation instrument is--
(1) A decree of divorce or separate maintenance or a written
instrument incident to such a decree;
(2) A written separation agreement; or
(3) A decree (not described in paragraph (q)(3)(vii)(B)(1) of this
section) requiring an individual to make payments for the support or
maintenance of the individual's former spouse.
* * * * *
0
Par. 6. Section 1.401(a)(9)-8, as revised in a final rule published
elsewhere in this issue of the Federal Register, effective September
17, 2024, is amended by:
0
a. Revising the second sentence of paragraph (a)(1)(iii)(B);
0
b. Revising the first sentence of paragraph (a)(1)(iii)(C); and
0
c. Adding paragraph (a)(1)(iii)(D).
The revisions and addition read as follows:
Sec. 1.401(a)(9)-8 Special rules.
(a) * * *
(1) * * *
(iii) * * *
(B) * * * Except as provided in paragraph (a)(1)(iii)(D) of this
section, the preceding sentence applies only if the separate interests
are held by separate see-through trusts (in which case the rules of
Sec. Sec. 1.401(a)(9)-4(f) and 1.401(a)(9)-5 will apply separately to
each separate trust).
(C) * * * For purposes of paragraph (a)(1)(iii)(B) of this section,
a trust is immediately divided upon the death of the employee only if,
as of the date of death, the trust is terminated and there is no
discretion as to the extent to which the separate trusts (or the
beneficiaries described in paragraph (a)(1)(iii)(D) of this section)
will be entitled to receive post-death distributions attributable to
the employee's interest in the plan. * * *
(D) Outright distribution to trust beneficiary. The separate
interests of the beneficiaries in a see-through trust will not fail to
be eligible for the exception under paragraph (a)(1)(iii)(B) of this
section merely because, upon termination of the trust, a beneficiary's
separate interest in the trust is to be held directly by that
beneficiary rather than being held by a separate see-through trust.
* * * * *
0
Par. 7. In Sec. 1.401(a)(9)-9, revise and republish the table set
forth in paragraph (c) to read as follows:
Sec. 1.401(a)(9)-9 Life expectancy and Uniform Lifetime tables.
* * * * *
(c) * * *
Table 2 to Paragraph (c)
------------------------------------------------------------------------
Applicable
Age of employee denominator
------------------------------------------------------------------------
10.................................................. 88.2
11.................................................. 87.2
12.................................................. 86.2
13.................................................. 85.2
14.................................................. 84.2
15.................................................. 83.2
16.................................................. 82.2
17.................................................. 81.2
18.................................................. 80.2
19.................................................. 79.2
20.................................................. 78.2
21.................................................. 77.2
22.................................................. 76.2
23.................................................. 75.2
24.................................................. 74.2
25.................................................. 73.3
26.................................................. 72.3
27.................................................. 71.3
28.................................................. 70.3
29.................................................. 69.3
30.................................................. 68.3
31.................................................. 67.3
32.................................................. 66.3
33.................................................. 65.3
34.................................................. 64.3
35.................................................. 63.3
36.................................................. 62.3
37.................................................. 61.3
38.................................................. 60.3
39.................................................. 59.4
40.................................................. 58.4
41.................................................. 57.4
42.................................................. 56.4
43.................................................. 55.4
44.................................................. 54.4
45.................................................. 53.4
46.................................................. 52.4
47.................................................. 51.5
48.................................................. 50.5
49.................................................. 49.5
50.................................................. 48.5
51.................................................. 47.5
52.................................................. 46.5
53.................................................. 45.6
54.................................................. 44.6
55.................................................. 43.6
56.................................................. 42.6
57.................................................. 41.6
58.................................................. 40.7
59.................................................. 39.7
60.................................................. 38.7
61.................................................. 37.7
62.................................................. 36.8
63.................................................. 35.8
64.................................................. 34.9
65.................................................. 33.9
66.................................................. 33.0
67.................................................. 32.0
68.................................................. 31.1
69.................................................. 30.1
70.................................................. 29.2
71.................................................. 28.3
72.................................................. 27.4
73.................................................. 26.5
74.................................................. 25.5
75.................................................. 24.6
76.................................................. 23.7
77.................................................. 22.9
78.................................................. 22.0
79.................................................. 21.1
80.................................................. 20.2
[[Page 58652]]
81.................................................. 19.4
82.................................................. 18.5
83.................................................. 17.7
84.................................................. 16.8
85.................................................. 16.0
86.................................................. 15.2
87.................................................. 14.4
88.................................................. 13.7
89.................................................. 12.9
90.................................................. 12.2
91.................................................. 11.5
92.................................................. 10.8
93.................................................. 10.1
94.................................................. 9.5
95.................................................. 8.9
96.................................................. 8.4
97.................................................. 7.8
98.................................................. 7.3
99.................................................. 6.8
100................................................. 6.4
101................................................. 6.0
102................................................. 5.6
103................................................. 5.2
104................................................. 4.9
105................................................. 4.6
106................................................. 4.3
107................................................. 4.1
108................................................. 3.9
109................................................. 3.7
110................................................. 3.5
111................................................. 3.4
112................................................. 3.3
113................................................. 3.1
114................................................. 3.0
115................................................. 2.9
116................................................. 2.8
117................................................. 2.7
118................................................. 2.5
119................................................. 2.3
120 +............................................... 2.0
------------------------------------------------------------------------
* * * * *
0
Par. 8. Section 1.402(c)-2, as revised in a final rule published
elsewhere in this issue of the Federal Register, effective September
17, 2024, is amended by:
0
a. In the first sentence of paragraph (f)(1), removing ``paragraphs
(f)(2) and (3)'' and adding in its place ``paragraphs (f)(2) through
(4)'';
0
b. Redesignating paragraph (f)(3) as (f)(4) and adding new paragraph
(f)(3); and
0
c. Adding paragraph (j)(4)(vii).
The addition and revision read as follows:
Sec. 1.402(c)-2 Eligible rollover distributions.
* * * * *
(f) * * *
(3) Distributions from designated Roth accounts. If a distribution
is not taken into account for purposes of section 401(a)(9) under the
rule in Sec. 1.401(a)(9)-5(g)(2)(iii), then it is not treated as a
distribution that is a required minimum distribution for purposes of
this paragraph (f).
* * * * *
(j) * * *
(4) * * *
(vii) Example. (A) Facts. Employee A is a participant in Plan X,
sponsored by Employer M. A, who was born in 1957, died in 2024 (the
calendar year A would have reached age 67 and accordingly before A's
required beginning date), having named A's surviving spouse, B, who was
born in 1958, as the sole beneficiary. The applicable age for both A
and B is 73. In accordance with the terms of Plan X, B is subject to
the 10-year rule. B takes a $1,000 distribution in 2031 (the calendar
year in which B reaches age 73). B takes no further distributions until
taking a distribution of A's remaining interest in Plan X in 2033 (the
ninth calendar year following the year of A's death, when B is age 75
and A would have reached age 76). The account balance as of December
31, 2032, was $100,000, and the distribution of the remaining interest
to B equals $103,000. B would like to roll over the distribution to B's
own IRA to the extent the distribution does not constitute a required
minimum distribution.
(B) Catch-up of required minimum distributions required. Because
the distribution is made in a calendar year after B attained the
applicable age and B intends to roll over the distribution to B's own
IRA, this paragraph (j)(4) applies to determine the portion of the
distribution that is treated as a required minimum distribution. The
first applicable year (determined in accordance with paragraph
(j)(4)(iv) of this section) is 2031 (the calendar year in which B
reached age 73 and the seventh year after the year of A's death).
Pursuant to paragraph (j)(4)(ii) of this section, the portion of the
$103,000 distributed in 2033 that is not an eligible rollover
distribution because it is treated as a required minimum distribution
under section 401(a)(9), is the excess, if any, of the sum of the
hypothetical required minimum distributions, determined in accordance
with paragraph (j)(4)(iii) of this section for each calendar year
beginning with the first applicable year and ending in the year of
distribution over the sum of the actual distributions made in each
calendar year beginning with the first applicable year and ending in
the year before the year of the distribution.
(C) Calculation of hypothetical required minimum distribution.
Pursuant to paragraph (j)(4)(iii) of this section, the hypothetical
required minimum distribution for 2031 (the year in which B reaches age
73) is $3,773.58 ($100,000.00/26.5). For 2032 (the year in which B
reaches age 74), the adjusted account balance is calculated by reducing
the $100,000.00 account balance by the excess of the hypothetical
required minimum distribution for the first applicable year over the
actual distributions made to the surviving spouse in that calendar
year, which is $2,773.58 ($3,773.58-$1,000.00). In this case, for the
second determination year, the adjusted account balance is $97,226.42
($100,000.00-$2,773.58) and the hypothetical required minimum
distribution for 2032 is $3,812.80 ($97,226.42/25.5). For 2033 (the
year in which B reaches age 75), the adjusted account balance is
calculated by reducing the $100,000.00 account balance by the excess of
the sum of the hypothetical required minimum distributions for
determination years preceding 2033 of $7,586.38 ($3,773.58 + $3,812.80)
over the actual distributions made to the surviving spouse during those
calendar years ($1,000.00), which is $6,586.38 ($7,586.38-$1,000.00).
Thus, the adjusted account balance for 2033 is $93,413.62 ($100,000.00-
$6,586.38) and the hypothetical required minimum distribution for 2033
is $3,797.30 ($93,413.62/24.6). The portion of the $103,000
distribution of the employee's remaining interest that is treated as a
required minimum distribution, and thus not an eligible rollover
distribution, is the excess of the sum of the hypothetical required
minimum distributions for each determination year in the catch-up
period, which is $11,383.68 ($3,773.58 + $3,812.80 + $3,797.30), over
the actual distributions made during the calendar years preceding 2033
($1,000.00), which is $10,383.68 ($11,383.68-$1,000.00). Accordingly,
the portion of the $103,000 distribution that is treated as a required
minimum distribution is $10,383.68.
(D) Calculation of eligible rollover distribution. Pursuant to
paragraph (j)(4)(vi) of this section, the plan administrator may assume
that, for purposes of section 402(f)(2)(A), a portion of the $103,000
distribution equal to $10,383.68 is not an eligible rollover
distribution. However, B could choose to roll over the entire $103,000
distribution to an IRA, provided the IRA is established as a
beneficiary IRA, and not as B's own IRA. In that case, in accordance
with Sec. 1.408-8(d)(2)(i), the IRA would be subject to the 10-year
rule that applied to the spouse under the plan (so that a distribution
of the
[[Page 58653]]
employee's entire interest would be required by 2034).
* * * * *
0
Par. 9. Section 1.408-8, as revised in a final rule published elsewhere
in this issue of the Federal Register, effective September 17, 2024, is
amended as follows:
0
a. Redesignate paragraph (g)(2)(vii) as paragraph (g)(2)(viii); and
0
b. Add new paragraph (g)(2)(vii).
The addition reads as follows:
Sec. 1.408-8 Distribution requirements for individual retirement
plans.
* * * * *
(g) * * *
(2) * * *
(vii) Corrective distributions that give rise to a reduction or
waiver of the section 4974 excise tax, as described in Sec.
1.401(a)(9)-5(g)(2)(iv).
* * * * *
Douglas W. O'Donnell,
Deputy Commissioner.
[FR Doc. 2024-14543 Filed 7-18-24; 8:45 am]
BILLING CODE 4830-01-P
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