The IRS recently issued IRS Notice 2022-53 which provides relief for certain missed IRC section 401(a)(9) required minimum death distributions. Under the 2022 proposed regulations interpreting the Secure Act, unless a person is an “eligible designated beneficiary,” IRA and defined contribution plan death benefits are subject to a 10-year payout rule and must be paid in annual installments each year, instead of in the form of a lump sum in the 10th year. This interpretation surprised some plans and beneficiaries, who are now being given relief for 2021 and 2022.
The relief applies only to “specified RMDs” (post-death RMDs that should have been made in 2021 or 2022 to beneficiaries under new 10-year payout rules that took effect in 2021 under the Secure Act, but were not made):
If a DC plan did not make a timely “specified RMD”, the plan will not be treated as having failed to satisfy IRC Section 401(a)(9) just because it did not make that distribution.
If an individual did not take a timely “specified RMD,” the IRS will not impose a Section 4974 penalty (50% of the RMD amount) against that individual.
If an individual already paid the penalty for a missed specified RMD, the individual can request a refund.
In the Notice, the IRS also clarified that final regulations related to RMDs will apply no earlier than the 2023 distribution calendar year.