Friday, December 15, 2023

Keep pace with changes from the SECURE 2.0 Act of 2022 (SECURE 2.0)

As legislation around SECURE 2.0 evolves, we want to keep you informed. Use this information to help you prepare and stay ahead of required minimum distribution (RMD) changes starting in 2024.

Spouse beneficiaries will have more RMD options. For RMD purposes, a plan participant’s surviving spouse may elect to be treated as a participant and receive smaller annual payments if:
1. the spouse is the plan participant’s sole beneficiary and
2. the spouse makes an irrevocable election to be treated as a participant.  
The surviving spouse’s distribution period is determined using the Uniform Lifetime Table instead of the Single Life Expectancy Table, both found in IRS Publication 590-B. Contact your client services team for necessary updates that can help you prepare to accommodate this election.

More RMD changes to come next year. Next year, SECURE 2.0 will exempt designated Roth account assets in 401(k), 403(b), and governmental 457(b) plans from pre-death RMD rules. As a result, plan sponsors won’t have to include designated Roth account assets in their RMD calculations. This provision applies to pre-death RMDs due for 2024 and later tax years. It’s not clear whether participants can distribute designated Roth account assets to satisfy their RMD, but it appears that designated Roth assets may not be used to satisfy an RMD during a participant's lifetime. Additional IRS guidance is needed to clarify this provision. Contact your client service team to discuss necessary updates so that 2024 RMDs are calculated correctly.