What’s New for 2023
- Quick Reference: Substantially Equally Periodic Payments/SEPP/72(t):
Quick reference Guide
The IRS issued Notice 2022-6, in which they provide guidance on distributions made under a substantially equal periodic payment (SEPP)/72(t) program.
Distributions taken under a SEPP/72(t) program are exempt from the 10% early distribution penalty that applies to early distributions from IRAs and employersponsored retirement plans.
Notice 2022-6 applies to SEPP/72(t) payments that commence on or after January 1, 2023, and may also be applied to those that commence in 2022.
Notice 2022-6 restates some of the previously existing SEPP/72(t) rules and explains what has changed.
- IRA Beneficiary Options: Eligible Designated Beneficiary & Designated
Beneficiary under the SECURE Act, as explained by the proposed RMD regulations that were published on February 24, 2022.
On February 24, 2022, the IRS issued proposed amendments to the income tax regulations (proposed regulations) that govern required minimum distributions (RMDs) for IRAs and accounts/benefits under employer plans. These regulations propose to update RMD regulations to reflect the amendments made by the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), enacted on December 20, 2019. While it was expected that the regulations would include clarifications, it has a few surprises that make it necessary for advisors to revise related advice to their clients.
Interpretations by the Proposed RMD Regulations
The proposed RMD regulations include a few surprises such as requiring designated beneficiaries to take annual RMDs when the account owner dies on or after the RBD. Confirmation that certain provisions of the existing regulations still apply was also provided. Changes that affect the guides in this publication are reflected accordingly.
- IRS Notice 2023‐53: IRS Waives Excise Tax for 2021 and 2022 RMDs for beneficiaries subject to the 10‐year rule
The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) introduced a new 10-year rule for certain beneficiaries who inherit IRAs after 2019. Language from the SECURE Act suggested that distributions during the first nine years after the account owner’s death were optional, though the entire balance must be distributed by the end of the 10th year. However, the proposed RMD regulations, published in February of 2022, explain that some beneficiaries must also take annual life expectancy RMDs under this new 10-year rule. In response to complaints from beneficiaries subject to the 10-year rule plus the annual life expectancy RMD requirement but did not take RMDs for 2021 and 2022, the IRS published Notice 2022-53, under which they waived the 50% excise tax that would otherwise apply.
You benefit from this waiver only if you are one of the following two types of beneficiaries:
a. You are a designated beneficiary who inherited an IRA from the owner in 2020 or 2021, and the IRA owner died on or after their required beginning date (RBD). The RBD is April 1 of the year that follows the year the IRA owner reached age 72 (70 ½ if they reached age 70 ½ by December 31, 2019). Generally, a designated beneficiary is a beneficiary who is a person or a qualified see-through trust.
b. You are a successor beneficiary of an IRA for which the original beneficiary is an eligible designated beneficiary taking annual life expectancy distributions, and you inherited that beneficiary IRA in 2020 or 2021.