Secure Act Section 313

Submitted by Jay Epstein on Mon, 2023-11-13 17:33

In early 2023, client became aware that his required SEP-IRA RMD for 2019 of about 95k was not distributed to him.
He had the SEP-IRA make a late distribution to him of 95k in early 2023, to be reported in his 2013 return.
He has not yet taken his 2023 RMD of about 115k.

A couple of questions:

1. Did the 3-year statute of limitations penalty relief provision in Secure Act 2.0 Sec 313 also apply to distributions so that the late distribution for 2019 could have been avoided. If so, can the distribution that was made in early 2023 be counted instead toward his 2023 RMD that has not yet been distributed to him?

2. There appears to be uncertainty as to whether Sec 313 is retroactive to prior years, or just starts upon exactment. Has there been any recent clarification of this question?

If I am correct in that uncertainty, is there any tax or penalty risk to the client to wait until IRS clarifies Sec 313?

If it is concluded that to be conservative, the late 2019 distribution received in 2023 should be reported as income in 2023, should a Form 5329 be filed for 2019? Or is that reporting (for 2019) now unnecessary due to Secure Act Section 313?

Many thanks for your thoughts on these questions.



Submitted by Alan - IRA critic on Mon, 2023-11-13 23:44

  1. That’s a good question because the Secure Act text is not clear whether this applies retroactively or not, and it is also not clear when the IRS will clarify this question. At minimum, the client should distribute another 20k this year so that the 2023 RMD will be complete.
  2. No IRS clarity to date. 
  3. Section 302 (reduced excise tax for excess accumulations)  which might be expected to have a consistent effective date with Sec 313, includes a statement that it is effective in the year after enactment (2023). Since 313 includes no such provision, one might think that the SOL can be applied retroactively, but that is not necessarily the case. Client will have to make a decision on incomplete info on the SOL.

Submitted by Jay Epstein on Tue, 2023-11-14 16:57

Assuming that client will be conservative, report the 95k in 2023 and also withdraw the 135k RMD for 2023, should Form 5329 be filed for 2019 to request penalty relief for the 95k?   It seems the answer would depend on the SOL question resolution, so that if Sec 313 is not retroactive, then running of the SOL would not start until the Form 5329 is filed, which was the law prior to Sec 313.   Is my thinking correct?If so, when should the Form 5329 be filed?  As soon as possible?

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