New IRA Distribution RulesFAQ's on the new IRA distribution rules
Roth Rules - Coming Soon
IRS Issues New Proposed Regulations for Retirement Plan Distributions
On 1/11/2001 the IRS issued new regulations intended to simplify the complex distribution rules originally proposed in 1987. The new rules are proposed to apply for required minimum distributions for calendar years beginning on or after 1/1/2002. Also,with the new rules, errors can now be corrected after the required begin date of 70 ½.
The new rules provide a new "Uniform Distribution Table" to be used by all taxpayers except those whose spouse is ten years younger than the retirement plan participant.
The new uniform table and accompanying regulations eliminate the need for the following:
- Identifying a "designated beneficiary" by the required begin date
- Determining the age of any beneficiary except a spouse who is ten years younger than the participant
- Changing distribution calculations when beneficiaries are changed
- Declaring recalculation or term certain distribution methods
The significant positive impacts to account holders and heirs include:
- There will no longer be a situation that requires payout within one year of a participant's death
- Beneficiaries need only be identified by the last day of the year after the year of death rather than the required begin date
- Distributions will be payable to beneficiaries over their life expectancy rather than the old five-year rule, unless the five-year rule is elected
- Post death changes can now be made to beneficiaries by use of disclaimers or by cashing out other beneficiaries
Post death distribution rules include the following:
- Life expectancies of beneficiaries is determined by their age in the year after the participants death
- For those with no named "designated beneficiary", continuing payouts will now be made over the deceased participant's remaining life expectancy
- If the participant dies prior to the required begin date without a named beneficiary the account must be paid out within five years of the participant's death
- Distributions will be based on the life expectancy of the oldest beneficiary
- Surviving spouses can rollover the account to their own name if they are the only named beneficiary.
- If the spouse is the oldest of multiple beneficiaries, life expectancy will be recalculated annually by use of the uniform table as long as the spouse is alive
- After a surviving spouse's death and for all other beneficiaries, life expectancy is decreased by one year for each year after the participant's death.
The required minimum distribution can be calculated for most individuals using this Table.
| Uniform Distribution Table |
| IRA Owner's Age |
RMD Factor |
. |
IRA Owner's Age |
RMD Factor |
| 70 |
27.4 |
. |
93 |
9.6 |
| 71 |
26.5 |
. |
94 |
9.1 |
| 72 |
25.6 |
. |
95 |
8.6 |
| 73 |
24.7 |
. |
96 |
8.1 |
| 74 |
23.8 |
. |
97 |
7.6 |
| 75 |
22.9 |
. |
98 |
7.1 |
| 76 |
22.0 |
. |
99 |
6.7 |
| 77 |
21.2 |
. |
100 |
6.3 |
| 78 |
20.3 |
. |
101 |
5.9 |
| 79 |
19.5 |
. |
102 |
5.5 |
| 80 |
18.7 |
. |
103 |
5.2 |
| 81 |
17.9 |
. |
104 |
4.9 |
| 82 |
17.1 |
. |
105 |
4.5 |
| 83 |
16.3 |
. |
106 |
4.2 |
| 84 |
15.5 |
. |
107 |
3.9 |
| 85 |
14.8 |
. |
108 |
3.7 |
| 86 |
14.1 |
. |
109 |
3.4 |
| 87 |
13.4 |
. |
110 |
3.1 |
| 88 |
12.7 |
. |
111 |
2.9 |
| 89 |
12.0 |
. |
112 |
2.6 |
| 90 |
11.4 |
. |
113 |
2.4 |
| 91 |
10.8 |
. |
114 |
2.1 |
| 92 |
10.2 |
. |
115 and older | 1.9 |
Caution: Do Not Use this table if your spouse is more than 10 years younger than you!
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FAQ's on the new IRA distribution rules
The new IRA distributions rules proposed by the IRS has created several new questions. The following is a sampling of some questions I've been asked.
What if the surviving spouse elects to roll over the IRA and treat as his or her own, does she use the new uniform table?
Yes, the surviving spouse becomes the IRA owner, so at age 70½ she or he would use the uniform table to calculate her RMDs.
Do the new rules apply to a Roth IRA?
Yes, after the death of the IRA owner, a Roth IRA is subject to the RMD rules.
Are the rules for distributions prior to age 59½ subject to the new rules?
No, the new rules are only applicable to Required Minimum Distributions not to early distribution payments. As a result, an IRA with no designated beneficiary must still use the single life expectancy tables rather than the new uniform table when taking distributions before age 59½.
A client died in 2000 at age 75 with no beneficiary. Under the old rules, we were required to take the entire account by 12/31/01. Do the new rules change that?
Yes, since this would be a 2001 distribution calendar year payment, the account can now be taken out over the account owner's remaining life expectancy reduced by one for each subsequent year.
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