IRS sets 2025 for final RMD rules, extends 10-year rule relief 

April 19, 2024

IRS Notice 2024-35 announces that final regulations on required minimum distributions (RMDs) under Internal Revenue Code (IRC) Section 401(a)(9) will apply starting in 2025. The notice also extends for a fourth year the relief available to defined contribution (DC) plans and beneficiaries for post-death distributions subject to the “10-year rule” under the Setting Every Community Up for Retirement Enhancement Act of 2019 (Div. O of Pub. L. 116-94) (SECURE 1.0).

IRS anticipates the final regulations will apply to RMDs for 2025 and later calendar years. The regulations will incorporate SECURE 1.0 changes to the RMD rules, including an increase in the RMD beginning age from 70-1/2 to 72 and the new 10-year rule. The regulation will also include some later changes made by the SECURE 2.0 Act of 2022 (Div. T of Pub. L. No. 117-328). Though IRS hasn’t specifically identified which additional changes will be reflected, the regulation will likely include SECURE 2.0’s further increase in the RMD beginning age to 73 for participants who turn 72 after 2022 (and to 75 for people who turn 74 after 2032). IRS intends to contemporaneously propose new regulations for other SECURE 2.0 changes when issuing the final rules.

The preamble to the 2022 proposed regulations said that until IRS issues final rules, plans and taxpayers should continue to rely on existing Section 401(a)(9) regulations, using a good-faith interpretation of SECURE 1.0. This reliance presumably now extends to good-faith interpretations of both SECURE 1.0 and 2.0.

SECURE 1.0 significantly restricted the availability of “stretch” payments over a beneficiary’s life expectancy from DC plans (the rule also applies to individual retirement arrangements (IRAs), but not defined benefit plans). When a participant dies, any undistributed benefits now generally must be paid in full to the designated beneficiary (if any) within 10 years of the participant’s death. (An exception applies for “eligible designated beneficiaries,” who have flexibility to receive stretch payments, while Section 401(a)(9)’s existing “five-year rule” remains in effect for beneficiaries who aren’t designated beneficiaries — eligible or otherwise.) This change applies for distributions to beneficiaries of participants who die after Dec. 31, 2019.

The proposed regulation would generally require these payments to begin the year after the participant’s death when the participant died after the RMD beginning age. This interpretation surprised many plan administrators and taxpayers, who had assumed payments could be delayed until the end of the 10th year because the five-year rule allows such a delay.

Notice 2024-35 provides relief for RMDs that should have been paid under the 10-year rule in 2024 to designated beneficiaries of participants who died in 2020–2023 after their RMD beginning age. (Earlier notices provided relief for RMDs that should have been paid in 2021–2023.) A DC plan won’t be treated as violating Section 401(a)(9) merely because it failed to make these distributions, and beneficiaries won’t be subject to an excise tax under IRC Section 4974 on their missed RMDs.

• Notice 2024-35 (IRS, April 16, 2024)
• Div. T of Pub. L. No. 117-328, the SECURE 2.0 Act of 2022 (Congress, Dec. 29, 2022)
• Proposed RMD regulations (Federal Register, Feb. 24, 2022)
• Div. O of Pub. L. 116-94, the SECURE Act of 2019 (Congress, Dec. 20, 2019)

• User’s guide to SECURE 2.0 (regularly updated)
• IRS again delays final RMD rule, gives new relief for SECURE acts (July 19, 2023)
• SECURE 2.0 brings more changes to required minimum distribution rules (Feb. 7, 2023)
• IRS delays final RMD regulation, gives relief for new 10-year rule (Oct. 14, 2022)
• IRS proposes updates to RMD rules for SECURE Act and more (April 20, 2022)