IRS Gives Extra Time to Fix RMDs Made Erroneously Under SECURE 2.0

July 21, 2023

The Internal Revenue Service and the Department of the Treasury have issued a notice that provides leniency regarding mistaken required minimum distribution payouts from retirement plans under new SECURE 2.0 Act of 2022 rules and gives additional RMD relief for beneficiaries of individual retirement accounts.

The IRS’s Notice 2023-54, issued on Friday, extends a 60-day rollover deadline for retirement plan accounts, including IRAs, that were mistakenly paid out as RMDs, even though they did not need to be. SECURE 2.0, passed in December 2022, amended Section 401(a)(9) of the Internal Revenue Code to increase the RMD age by one year to 73.

In the notice, the IRS wrote that plan administrators and other payors commented that, following SECURE 2.0, “automated payment systems would need to be updated to reflect the change in the required beginning date” and that they “expressed concern that these revisions could take some time to implement.” As a result, there could have been RMDs taken out for those who were still young enough to keep them within the retirement savings investment.

The latest notice grants relief to any distribution made between January 1 and July 31 to a participant born in 1951, allowing that distribution to roll back into the savings plan.

Originally Published on PLANSPONSOR
Written by Alex Ortolani