3895 / What is the beginning date for required minimum distributions from a qualified plan?

Editor’s Note: The SECURE Act, enacted on December 20, 2019, made significant changes in required minimum distribution (RMD) rules for all qualified plans. It added a new subsection (H) to IRC Section 401(a)(9) to change the mandatory start date for RMDs from age 70½ to age 72 for distributions made after December 31, 2019 (the change applies only to individuals who attain age 70½ after that date).  The age 72 required beginning date applied in 2020-2022.  Beginning in 2023, SECURE 2.0 raised the required beginning date to age 73.  In 2033, the age is once again set to increase to 75.

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Planning Point: The IRS allowed taxpayers who received RMDs that turned out to be unnecessary due to the change in the RBD age to roll those amounts back into their accounts. The relief applies for taxpayers who took RMDs between January 1, 2023 and July 31, 2023. The amounts were required to be rolled back into the account by September 30, 2023.¹

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In order to be qualified, a plan must provide that the entire interest of each employee will be distributed not later than his required beginning date, or will be distributed beginning not later than the required beginning date over certain prescribed time periods.²

For purposes of the minimum distribution rules ( Q 3892 to Q 3908) and the minimum distribution incidental benefit rule ( Q 3909), the term “required beginning date” means April 1 of the calendar year following the later of (1) the year in which the employee attains age 73 or (2) the year in which the employee (other than a 5 percent owner) retires from the employer maintaining the plan.³

In the case of a 5 percent owner, there is only one required beginning date: April 1 of the calendar year following the year in which the employee attains age 73.⁴ Under pre-SECURE Act law, the IRS determined that where a 5 percent owner rolls the account balance over to the plan of another employer in which the 5 percent owner was not a 5 percent owner (after receiving the required distribution for the year in question), the individual could delay distributions from the new plan until retiring after age 70½.⁵

Under pre-SECURE Act regulations, a plan was permitted to provide that the required beginning date for all employees was April 1 of the calendar year following the calendar year in which the employee attained age 70½ regardless of whether the employee is a 5 percent owner.⁶ Presumably, this ability to mandate distribution will be available even though the SECURE Act has changed the attained age from 70½ to 72 and SECURE 2.0 once again raised the relevant age to 73.

If distributions began irrevocably (except for acceleration) prior to the required beginning date in the form of an annuity that meets the minimum distribution rules, the annuity starting date will be treated as the required beginning date for purposes of calculating lifetime and after death minimum distribution requirements ( Q 3896).⁷

Pre-SECURE Act, if, for example, an employee’s date of birth is June 30, 1939, the employee would reach age 70 on June 30, 2009, and would reach age 70½ on December 30, 2009. Consequently, assuming the employee is retired or a 5 percent owner, the employee’s required beginning date would be April 1, 2010. Because distributions from a defined contribution plan were waived for 2009, a distribution from a defined contribution plan would not be required until December 31, 2010. (See Q 3892.) If the same employee’s birthday were July 1, 1948, the employee would reach age 70½ on January 1, 2019, and the employee’s required beginning date would be April 1, 2020.⁸ Post-2019, if for example, the employee’s date of birth is July 1, 1949, the employee would reach age 70½ on January 1, 2020. Pre-SECURE Act (under prior law), the calendar year for the first required distribution for the employee would be 2020. But, because the employee will have reached age 70½ after December 31, 2019, the new law will apply, and the first calendar year of distribution to the employee will be 2022. Unfortunately, any employee born a day earlier (June 30, 1949) or more is stuck with the first distribution in calendar year 2020 (although RMDs were waived for 2020, see Q 3892).