Legislation requires review and amendment of plan documents
Signed into law on December 20, 2019, the SECURE Act increased the required minimum distribution age from employer-sponsored retirement plans from 70.5 to 72.
This change to the RMD rules is effective for plan participants who turn 70.5 after December 31, 2019. Plan document provisions that address RMD age rules should be reviewed and amended.
Plan sponsors should work with the plan recordkeeper or document provider to facilitate any required document amendments. Plans may retain RMD provisions that require distributions at an earlier age.
Note: The CARES Act allows for the waiver of RMDs due in 2020.
What you should know
- Plans will need to update policies and procedures for notifying participants of an upcoming RMD trigger date and for any RMD-related notices being sent to participants.
- Plan sponsors should identify participants who will reach age 72 or older on an ongoing, annual basis. It is important to distinguish between employees who own 5% or more of the company and other employees, as RMD requirements may differ.
- If the plan document permits, participants who continue to work for the plan sponsor company do not have to take an RMD. If the participant owns 5% or more of the company, they must take the RMD even if they continue to work.
- The CARES Act 2020 Required Minimum Distribution waiver allows qualified defined contribution plans, 403(b) plans, IRAs or eligible 457(b) plans to waive required minimum distributions that were due in 2020.
- Funds may be left in defined contribution plans/IRAs rather than taking required minimum distributions in 2020 during a period of steep market declines
- 2020 distributions remain available, and those distributions are exempt from the 20% mandatory withholding that applies to eligible rollover distributions and certain other requirement