• Eligible designated beneficiaries who were older than the decedent taking RMDs could use the decedent ’ s age for RMDs , but they ’ d end based on the beneficiary ’ s shorter life expectancy .

• Minor child beneficiaries had to take RMDs until age 21 ; they would continue to take RMDs if the decedent was taking them until age 31 , when the account would be liquidated . If the decedent was not taking RMDs , the child beneficiary would have until the end of the 10th year to liquidate the account .

• Designated beneficiaries who were not “ eligible ” must take RMDs if the decedent was taking them and can wait until the 10th year if the decedent was not .

• If the account is a Roth IRA , designated beneficiaries have no RMDs ; eligible designated beneficiaries follow the same rules as other IRAs and non-designated beneficiaries use the five-year rule . AICPA and others urged IRS to do something in 2022 to handle the confusion of making surprising rules that would be impossible to fix . In response , IRS issued Notice 2022-53 in October 2022 that waived any 50 percent penalties for those designated beneficiaries who failed to take RMDs for 2021 or 2022 , and put off the effective date of final regulations until 2023 .

Along came SECURE 2.0 in December 2022 that tinkered with

SECURE divided designated beneficiaries into two classes : eligible designated beneficiaries and those not “ eligible .”

the 50 percent penalty for failure to take RMDs when required . To make it more interesting , IRA custodians and plan administrators have never had a requirement to calculate RMDs for beneficiaries , so they ’ ve always been more vulnerable to missed RMDs than retirees .

SECURE 2.0 reduced the 50 percent penalty to 25 percent and reduces the 25 percent penalty to 10 percent if the missed RMD is withdrawn timely . Before SECURE 2.0 , the IRS could waive the penalty for a missed RMD if there was a good reason for failure and the missed amount was withdrawn . You could request the waiver on Form 1040 or 1041 as an attachment to Form 5329 where penalties were assessed . The waiver language was not removed by SECURE 2.0 , so a waiver is still possible .

Another change by SECURE 2.0 is a statute of limitations on the 50 percent / 25 percent / 10 percent penalty . Previously the Tax Court indicated that the statute did not run for a penalty assessed on Form 5329 unless the form was filed . Now the statute of limitations for a missed RMD is three years , probably the same as the statute of limitations for the associated Form 1040 . That provision was effective upon enactment , but it ’ s unclear whether past failures are covered by the new law .

Mary Kay Foss CPA is a member of the CalCPA Estate Planning Committee . You can reach her at marykay @ marykayfosscpa . com .

Explore the discounts available to you on products and services specifically geared toward CPAs .

Visit calcpa . org / affinity