By Pension and Benefits Editorial Staff
The IRS has released guidance for financial institutions on reporting required minimum distributions (RMDs) for 2020 after the amendment of Code Sec. 401(a)(9) by Division O, the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), enacted as part of the Further Consolidated Appropriations Act, 2020 (P.L. 116-94).
Section 114 of the SECURE Act amended Code Sec. 401(a)(9) to change the required beginning date applicable to Code Sec. 401(a) plans and other eligible retirement plans described in Code Sec. 402(c)(8), including individual retirement accounts and annuities (IRAs). The new required beginning date for an IRA owner is April 1 of the calendar year following the calendar year in which the individual attains age 72, rather than April 1 of the calendar year following the calendar year in which the individual attains age 70½.
This amendment is effective for distributions required to be made after December 31, 2019, for individuals who will attain age 70½ after that date. Thus, IRA owners who will attain age 70½ in 2020 will not have a required beginning date of April 1, 2021 and will not be required to take a RMD for 2020.
Reporting relief. The IRS explains that, if an IRA owner has an RMD due for 2020, the financial institution that is the trustee, custodian, or issuer maintaining the IRA must furnish a RMD statement to the IRA owner by January 31, 2020 that informs the IRA owner of the date by which the RMD must be distributed, and either provides the amount of the RMD or offers to calculate that amount upon request. Also, that financial institution must file a 2019 Form 5498 (IRA Contribution Information) by June 1, 2020 and indicate by a check in Box 11 that an RMD is required for 2020. The financial institution may also choose to provide further information in Box 12a (RMD Date) and Box 12b (RMD Amount).
The IRS states that the RMD statement should not be sent to IRA owners who will attain age 70½ in 2020. However, recognizing the short amount of time after the enactment of the SECURE Act that financial institutions have to change their systems for furnishing the RMD statement, the IRS is providing relief. Under this relief, if a financial institution provides an RMD statement to an IRA owner who will attain age 70½ in 2020 (including by providing a Form 5498), then the IRS will not consider such a statement to have been provided incorrectly, but only if the IRA owner is notified by the financial institution no later than April 15, 2020, that no RMD is required for 2020. The IRS further instructs financial institutions that, for IRA owners who will attain age 70½ in 2020, the 2019 Form 5498 should not include a check in Box 11 or entries in Box 12a or 12b.
The IRS notes that the SECURE Act did not change the required beginning date for IRA owners who attained age 70½ prior to January 1, 2020. To reduce misunderstanding among IRA owners, the IRS encourages all financial institutions, in communicating these RMD changes, to remind IRA owners who attained age 70½ in 2019, and have not yet taken their 2019 RMDs, that they are still required to take those distributions by April 1, 2020.
The IRS states that it is considering what additional guidance should be provided with respect to the SECURE Act, including guidance for plan administrators, payors, and distributees if a distribution to a plan participant or IRA owner who will attain age 70½ in 2020 was treated as an RMD.
Source: IRS Notice 2020-6.
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