Required Minimum Distribution Changes on the Horizon?

Take-Away: There is a Bill languishing somewhere in the House of Representatives that would amend the Tax Code to increase the age when required minimum distributions (RMDs) begin from age 72 to age 75. The Bill would also relieve an IRA owner from having to take an RMD if the aggregate balance of all defined contribution accounts owned by the participant was less than $100,000.

Background: Stephanie Murphy, a Florida Democrat, filed the Required Minimum Distribution Modernization Act to increase the required beginning date (RBD) from age 72 to age 75. In addition, under the Bill, if an individual owner of a qualified plan retirement account had less than $100,000 in the aggregate in their retirement accounts balances, then the participant would not be required to take an RMD for that calendar year. [H.R. 8567.

• The Bill was referred to the Ways and Means Committee, which got pretty much ignored through most of 2021 with the Presidents Build Back Better Act.
• If enacted, the Bill would amend IRC 401(a)(9)(C)(i)(1) to strike age 72 and insert age 75 for qualified retirement plan accounts. The same would apply to RMDs for IRAs. [IRC 408(b).]
• The suspension of any RMD obligation, if the aggregate balances of all qualified plan/retirement accounts does not exceed $100,000, uses a snapshot date on the last day of the calendar year to which such distribution relates, which is referred to as the measurement date.
• The Bill that suspends RMDs does not refer to IRA accounts with account balances of more than $100,000.
• The $100,000 amount held in the qualified plan account would be adjusted annually for inflation, rounded to the next $5,000.
• Plan administrators would be entitled to rely on a plan participant’s certification and will not be treated as failing to meet reporting requirements for RMDs for the participant. The participant would certify that his/her interest under all defined contribution plans on the most recent measurement date with respect to that participant did not exceed the dollar amount in effect for such year.

Conclusion: Who knows if this Bill will ever become law. It is apparent, though, that there seems to be more than passing interest in Congress to tweak existing required distribution rules. The 2019 SECURE Act increased the RBD from age 70 ½ to age 72. The 2020 CARES Act suspended all RMDs for 2020. For part of 2021 we were confronted with proposed legislation that would have compelled distributions from ‘jumbo’ IRAs and qualified plan balances over $10 million. With the new life expectancy tables set to become effective on 1/1/2022, indicating longer life expectancy for all individuals, it is possible that we may see even more changes to the retirement plan mandatory retirement plan distribution rules in 2022.