5 Suggestions for the IRS on Secure Act RMD Regs, From Annuity and Pension Pros

The IRS set off a complicated round of letter writing in February, when it posted draft regulations for new rules governing the required minimum distribution. The comment period is closing Wednesday. The agency developed the draft to implement RMD rule change provisions in the Setting Every Community Up for Retirement Enhancement Act of 2019, known as the Secure Act. Some Secure Act RMD provisions could take effect for "the last day of the first plan year beginning on or after January 1, 2022." A coalition of 12 life and annuity groups united in March to ask the IRS to extend the deadline for at least one full calendar year, saying the current deadline is unrealistic. For a look at what some other commenters are saying, specifically, about the RMD draft regulations and annuities, or about defined benefit pension plans that might use annuities as the funding vehicle, see the gallery above.

RMD Basics

The RMD is, in effect, the government's own favorite retirement income arrangement. The RMD rules are supposed to set minimum levels for the amount of taxes relatively affluent taxpayers pay on the assets held in 401(k) plan accounts, traditional IRAs, and other tax-deferred retirement vehicles. Once the client reaches RMD age, the client must begin taking a minimum level of cash from the retirement nest egg and include the cash coming out of the nest egg in calculations of taxable income. The Secure Act raised the RMD age from 70 1/2 to 72. Ed Slott pointed out recently, in an email to ThinkAdvisor's Melanie Waddell, that agents and advisors need to pay close attention to the proposed regulations, because some provisions indicate how the IRS is interpreting existing law and are, technically, already effective. (Image: Andrii Vodolazhskyi/Shutterstock)