The life expectancy tables (the “Tables”) that are used in calculating required minimum distributions (“RMDs”) under qualified retirement plans, IRAs and certain other types of retirement arrangements have been updated. These updated Tables were promulgated in final regulations published in November 2020, with an effective date of January 1, 2022. RMDs are payments that Code Section 401(a)(9) requires to be distributed, generally annually, to persons participating in the above arrangements, with such payments commencing no later than the taxpayer’s “required beginning date,” as defined in Regs. Section 1.401(a)(9)-2, Q&A-2.
These updated Tables apply to any RMD that is payable for “distribution calendar years” beginning on or after January 1, 2022. The term “distribution calendar year” is a technical term that generally means a calendar year in which a required distribution must occur. However, there’s an important exception to this, illustrated by the following example:
- If you are the taxpayer and your 72nd birthday occurred last year (in 2021), your first “distribution calendar year” was 2021. Your “required beginning date” was April 1 of the following year (April 1, 2022). In effect, you could elect to postpone the receipt of your initial RMD to 2022. Even if you did, though, it would still be considered your RMD for the distribution calendar year 2021. As such, it would have to be calculated using the older Tables in effect in 2021, not the updated (2022) Tables.
If you have to make an RMD calculation this year, the newly updated Tables are easy to find in IRS Publication 590-B. This Publication contains worksheets and instructions that will make it relatively easy to calculate RMDs using the correct methodology – including the correct life expectancy tables.
The recent update seems to have been long overdue, as the Tables were last updated more than two decades ago. And during the intervening years, life expectancies – not surprisingly – have significantly increased. The result: RMDs calculated using the updated Tables will be smaller than they’d have been under the old ones. A bit of good news for taxpayers.
And the update didn’t appear to receive nearly the same attention or publicity that another recent change to the RMD rules attracted. That was the increase in the triggering age, from 70 ½ to 72, in the SECURE Act. It should also be noted that Pub. 590-B wasn’t revised to include the new Tables until February 28 of this year. If you’d consulted the publication in January or February to calculate a 2022 RMD, you might have erred in your calculation by using the by-then older, extinct Tables you found there. So, if you already received an RMD payment in the first few months of 2022, you may want to double check the calculation. It could easily have been incorrect.
If you have any questions about these changes, the attorneys of KLB Benefits law Group are available to answer them.