Confused on 10 yr rule AND taking RMDS
On 1/6/22 there was a question/answer posted on https://irahelp.com/slottreport/10-year-payment-rule-and-2022-post-death-required-minimum-distributions-today%E2%80%99s-slott
Q:Has the IRS clarified the 10-year rule on inherited IRAs? Do you have to take RMDs each year or can you wait until the 10th year? Also, does this rule apply to inherited Roth IRAs?
Thanks,
Daniel
A:Hi Daniel,
Yes, the IRS has clarified that annual RMDs from an inherited IRA are not required under the 10-year payout rule. The 10-year rule only requires that the entire account be distributed by December 31 of the year of the 10-year anniversary of the original IRA owner’s death. The rule does also apply to Roth IRAs.
Seems pretty clear, if you’ve elected the 10-yr payout, you’re not required to do RMDs in addition to withdrawing all the money by the end of the 10th year.
BUT THEN ON, 3/9/22 at https://irahelp.com/slottreport/secure-act-regs-bring-new-roth-ira-advantage
Sarah Brenner says
…….”In the new regulations, the IRS has taken the position that when an IRA owner dies on or after their required beginning date and the 10-year rule applies, the account is also subject to annual RMDs. This surprising interpretation of the SECURE Act will affect a lot of IRA beneficiaries because most IRA beneficiaries will be subject to the 10-year rule under the SECURE Act and many IRA owners die when they are older and beyond their required beginning date. …….
Is Sarah posting old information about the initial interpretation of the SECURE act?
Which is it, do you have to do RMD and 10 yr rule?
Sincerely,
IRA Confused
Permalink Submitted by Alan - IRA critic on Fri, 2022-03-11 18:04
The confusion is certainly not surprising considering that the IRS has changed their minds twice in the last few months. Sarah’s 3/9 statement is correct, since the recently proposed new RMD Regs indicate that when the plan owner passes on or after the RBD, there will be annual life expectancy RMDs required each of the first 9 years within the 10 year rule, with the remainder of the balance drained in year 10. These annual RMDs do not apply if the owner passed prior to RBD, and do not apply to any Roth IRAs since all Roth owners are treated as passing prior to the RBD (since there is no RBD for Roth owners).
Permalink Submitted by Jon Steffen on Fri, 2022-03-11 18:08
Thanks Alan- where are these “recently proposed new RMD Regs”?I always like to cite an official IRS source if I can. Thank you!
Permalink Submitted by Alan - IRA critic on Fri, 2022-03-11 20:00
See p 44 of the following new proposed RMD Regs:
2022-02522.pdf (federalregister.gov)
Permalink Submitted by Jon Steffen on Tue, 2022-03-15 14:52
Page 44 is referencing defined contribution plans and employees. Does this also cover Traditional IRAs and the inheritence of them?
Permalink Submitted by Alan - IRA critic on Tue, 2022-03-15 15:26
Yes. For an IRA the IRA owner is treated as the employee for purposes of IRS RMD Regs, and the IRA custodian is treated as the plan administrator. Ref IRS Reg 1.408-8, QA 1(b).