An updated version of Publication 590-B was posted on March 29, 2021 (release date on the publication is March 25, 2021). When the publication was released prematurely, it caused quite a stir and flurry of comments.
Of course this publication is for IRAs; however, the flurry that it caused spans all retirement plans when it comes to required minimum distributions (RMDs).
Let’s dissect what should have happened, what did happen and what we anticipate will happen.
What Should Have Happened
We understand that IRS planned to release proposed RMD regulations before any publication or IRA model forms. Unfortunately, the RMD regulations were held up in clearance and the publication was released early. The intended chain of events was: regulations, industry comments, final regulations. Subsequently, the publication and the IRA model forms would be issued.
What Did Happen
The answer to this is clear. After learning of discrepancies in the publication, the IRS now plans a revision to clarify “some things.” We will have to wait and see what is determined when the proposed regulations are finally issued. But we have heard that the publication will clarify the 10-year rule is the same as the 5-year rule and will reflect that the beneficiaries will not need to take annual distributions.
Upon release, there will be a comment period to communicate any differences of opinion with respect to interpretation.
What Will Happen
It is anticipated that IRS will issue the proposed RMD regulations no later than June. After that, all publications that refer to the RMD rules will be updated and released, as well as the updated IRA Model Form 5305 series. Then we can all start to plan for a mass mailing of the plan documents.
Final Comment
One interpretation that requires a second look is details of the new 10-year payout to designated beneficiaries. The statute (the law) is clear as to how the 5-year payout must be completed, with no annual distribution requirement. Since the new 10-year rule was intended to directly mirror the 5-year rule, it would be very unusual for a publication to essentially reinterpret a law since publications do not have the force and effect of law.
The bottom line is… we need to wait. To make certain assumptions may be premature on our part! As a very wise colleague said, inconsistencies may have been caused by the haste of an already overburdened IRS staff.
Sue Diehl, QKA, CPC, ERPA, CBFTM, is the President of PenServ Plan Services, Inc.
Opinions expressed are those of the author, and do not necessarily reflect the views of the NTSA or its members.
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