Guidance and extended transition relief for certain required minimum distributions for defined contribution plans

On April 16, 2024, the Internal Revenue Service (IRS) issued Notice 2024-35, which provides guidance and extended relief related to certain required minimum distributions (RMDs) that are not made in 2024. The IRS previously provided similar relief for certain RMDs that were not made in 2021, 2022, and 2023.

The IRS also announced in this Notice the anticipated applicability date of the yet-to-be-issued final regulations related to RMDs.

Defined contribution plans that did not make a specified RMD

The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) made changes to the post-death RMD requirements for defined contribution (DC) plans. Generally, a deceased employee’s benefit in a DC plan must be entirely paid to a designated beneficiary by the end of the 10th calendar year following the year of the employee’s death (the 10-year rule). If the designated beneficiary is an eligible designated beneficiary (as defined in the statute), payments can be made over the designated beneficiary’s lifetime or life expectancy instead of using the 10-year rule. If an eligible designated beneficiary dies before receiving the employee’s total benefit, any remaining benefits must be paid to their beneficiary within 10 years of the eligible designated beneficiary’s death.

This Notice provides relief to DC plans that failed to make a specified RMD, which for purposes of this Notice is defined as any RMD that would have been required in 2024 to be made to:

• A designated beneficiary of an employee who died in 2020, 2021, 2022, or 2023, and on or after the employee’s required beginning date, and payments to the designated beneficiary are not being made over their lifetime or life expectancy.
• A beneficiary of an eligible designated beneficiary who died in 2020, 2021, 2022, or 2023, and payments were being made to the eligible designated beneficiary over their lifetime or life expectancy.

The IRS is providing the following relief for DC plans that failed to make specified RMDs:

• The plan will not be treated as having failed to satisfy the RMD rules because it did not make a specified RMD.
• The IRS will not assess an excise tax to the individual if they did not take a specified RMD.

Applicability date of final RMD regulations

The Notice provides that, when the final RMD regulations are issued, they are anticipated to apply for calendar years beginning on or after January 1, 2025.

Please contact your Milliman consultant to review how these provisions may impact your plan(s).