The Securing a Strong Retirement Act (SECURE Act 2.0) introduced several changes to retirement plans, namely raising the age for Required Minimum Distributions from 72 to 73. The IRS has recently issued relief relating to certain RMDs made during 2023. Let’s dive in.

What is an RMD?

Your required minimum distribution is the minimum amount you must withdraw from your account each year. This applies to Individual Retirement Accounts (IRAs), SIMPLE IRAs, and SEP IRAs. Roth IRAs do not require withdrawals until after the death of the account owner.

Up until 2020, you were required to take your first RMD the year you turned 70 ½. For each year thereafter, the required minimum distribution was to be made annually by December 31.

What did the SECURE Act 2.0 change?

In 2020, the SECURE Act changed the age requirement from 70½ to 72, meaning anyone whose date of birth was after June 30, 1949, had until age 72 to take his/her first RMD.

SECURE 2.0, signed December 29, 2022, then raised the 72-age requirement to 73 for 2023. The increase to age 73 is effective as of 1/1/2023.

What’s new?

In response to timing concerns about implementing the date change, the IRS has granted relief to certain RMDs made during 2023 to individuals, that were characterized as RMDs but are not actually RMDs (as a result of the SECURE Act 2.0 change).

The relief applies to payers or plan administrators who did not treat certain RMDs as eligible rollover distributions. This applies to distributions made between January 1, 2023, and July 31, 2023. It's targeted at participants born in 1951 (or their surviving spouses) and is related to those distributions that would have been required minimum distributions (RMDs) if it wasn't for the change in the required beginning date under SECURE 2.0.

Additionally, the IRS is extending the 60-day rollover period for distributions not treated by a payer or plan administrator as eligible rollover distributions to September 30, 2023

This extension is also available for certain distributions made to an IRA owner (or surviving spouse). That portion of the distribution can be rolled over to September 30, 2023.

In summary, if you were born in 1951, turning 72 in 2023, you are NOT required to take an RMD in 2023. If you received a distribution from your IRA between January 1, 2023 and July 31, 2023, you have the option of rolling those funds back into your IRA by September 30, 2023 to avoid the taxable income resulting from the distribution.

Wondering if the relief applies to you? Questions on your RMD options? We can help. Contact us.