IRS Issues Guidance Amid Secure Act RMD Confusion

Advisors, he continued, “should reassure any client who turns 70½ in 2020 that they do NOT have an RMD this year, even though they received a statement from their IRA custodian saying they do. That statement is incorrect — so advisors can tell clients not to worry.”

On the other hand, Slott said, “advisors should also alert clients who turned age 70½ last year (in 2019) to let them know that they do NOT qualify for the age 72 RMD rule, because that new increased RMD age provision only applies to those who turn 70½ in 2020 or later. These clients still do have RMDs, the same as under the old rules. There is lots of confusion here for advisors to deal with.”

Advisors, Slott concluded, “have lots of calls to make, especially to their 70½ clients who may be getting and acting on incorrect information from their IRA custodian. This is another reason why you have an advisor.”

As the IRS notice explains, the Secure Act “did not change the required beginning date for IRA owners who attained age 70½ prior to” Jan. 1, 2020.

“In order to reduce misunderstanding among IRA owners, the IRS encourages all financial institutions, in communicating these RMD changes, to remind IRA owners who attained age 70½ in 2019, and have not yet taken their 2019 RMDs, that they are still required to take those distributions by April 1, 2020.”

The Treasury Department and IRS state that they are considering providing additional guidance with respect to the Secure Act, including guidance for plan administrators, payors and distributees if a distribution to a plan participant or IRA owner who will attain age 70½ in 2020 was treated as an RMD.

— Related on ThinkAdvisor:

• Secure Act’s 401(k) Annuity Options: The Pros and Cons
• Secure Act Forcing Shift in IRA Planning
• 3 Stretch IRA Alternatives for Estate Planning