There’s a bit of confusion over the age extension for required minimum distributions (RMD) contained in the recently enacted SECURE Act.
Thankfully, the IRS is here to help (wait …what?).
More specifically, the IRS has provided relief to financial institutions that were expected to provide RMD statements to those IRA owners by January 31, 2020, who are now no longer required to take distributions this year.
“Notice 2020-6 clarifies that if an RMD statement is provided for 2020 to an IRA owner who will turn age 70½ in 2020, the IRS will not consider the statement to be incorrect, but only if the financial institution notifies the IRA owner no later than April 15, 2020, that no RMD is due for 2020,” according got the revenue-gathering arm of the United States government.
The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) changed the age for which an RMD is first required from age 70½ to 72. Under prior law, financial institutions would have needed to notify IRA owners who attained age 70½ in 2020 about their 2020 RMDs by January 31, 2020.
IRS ‘encouragement’
The IRS encourages all financial institutions, in communicating these RMD extension changes, to remind IRA owners who reached 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 RMD statement required under Notice 2002–27 should not be sent to IRA owners who will attain age 70½ in 2020,” the IRS adds. However, in recognition of the short amount of time after the enactment of the SECURE Act that financial institutions have had to change their systems for furnishing the RMD statement, relief is being provided.”
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 Internal Revenue Service (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.
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.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
