New weird thing in Pub 590-B
I was looking at the revised Pub 590-B for the first time today, and was grateful to see that the Service clarified that a designated beneficiary does *not* have to take stretch RMDs for years 1-9 before lumping out in year 10.
I was also glad to see that they clarified that an EDB can opt for the 10-year rule if they wish. However, in that same paragraph, it’s stated that a surviving spouse EDB cannot opt for 10-year if the deceased IRA owner was past RBD. That had me scratching my head.
SECURE’s changes to 401(a)(9) make it clear that the 10-year rule applies to designated beneficiaries even if the decedent had hit RBD before they died. Why would the Service allow a SS to take the 10-year only if the deceased spouse hadn’t hit RBD before they died? Why would they make the 10-year option more restrictive for a SS than, say, a bene that was the decedent’s best friend?
I can kind of see the circular logic of subsections B and H in 401(a)(9), but it still seems weird that a SS could not use 10-year if the deceased spouse had lived past RBD.
Am I missing something here? The language in question is on page 11 of the Pub, left-hand side under the header “10-year rule”.
Please and thank you.
Permalink Submitted by William Tuttle on Fri, 2021-06-04 15:24
There are tax experts raising that exact issue. Also, there have been reports that industry associations, large IRA custodians and employer plan record keepers have asked the IRS for a fully validated release of actual IRS substanital authority on the Secure ACT’s new inherited retirement account distribution rules. There are a lot of frustrated people out there wondering who’s in charge of this Pub 590-B mess.
Permalink Submitted by Alan - IRA critic on Fri, 2021-06-04 16:29
Agree. Note some of the comments in the following chart developed by Denise Appleby. I guess if there was RMD confusion and lack of compliance on beneficiary RMDs in the past, it will be worse now.
Microsoft Word – Beneficiary Options Chart – for David Baker.docx (benefitslink.com)
Permalink Submitted by Robert Vashko on Sat, 2021-06-05 01:29
Thank you both. 590-B is losing credibility as a resource in this regard. At least for me.
Permalink Submitted by Alan - IRA critic on Sat, 2021-06-05 02:29
Even the above chart contains a questionable entry. Under qualified trusts, death prior to RBD, it shows the option of RMDs using decedent’s remaining LE. Such option has only existed through the years for deaths after RBD. I think that entry is incorrect.