The Cuban Missile Crisis and RMDs

A recent blog post explores an unusual aspect of required minimum distributions, arguing that they have a connection to the 1962 Cuban Missile Crisis.

What connection could there possibly be between RMDs and the most perilous confrontation between the United States and the Soviet Union? Seyfarth’s Richard Schwartz articulates the answer in “The Required Minimum Distribution Date for Retirement Benefits & the Cuban Missile Crisis.”

In October 1962, the two superpowers stood eye to eye over missiles the Soviet Union had stationed in Cuba, just off the southern tip of Florida. For 13 days the two nations stood on the brink of a nuclear conflict, before the Soviets finally blinked and removed the missiles.

While the White House was occupied with the crisis, Congress continued business as (mostly) usual, including passing the Self-Employed Individuals Tax Retirement Act of 1962 (Pub. L. 87-792), which was enacted that same month. Schwartz writes that the legislative history of the measure indicates that Congress adopted the half-birthday (as in age 70½) convention “to accord with usual insurance practice which treats the maturity date of an annuity, endowment or life insurance contract as falling on the anniversary date of the policy nearest to the insured’s birthday.”

Nearly 60 years later, the SECURE Act was enacted. The new law removes that vestige of one of the most tense times in U.S. history – dropping the half-year convention and providing for an RMD date starting at age 72.

Schwartz notes that the reasons for the switch from age 70½ to 72 include a rise in life expectancy since 1962 and a shift in the predominant form of retirement benefit from DB pension plans to individually based accounts such as DC plans and IRAs. “Congress has become increasingly concerned about the ability of workers today to fund a sufficient retirement for themselves. The SECURE Act includes several provisions that reflect this concern, the deferral of the RMD date being just one such provision,” writes Schwartz.