South Florida Sun-Sentinel (Sunday)
IRS FINALIZES NEW TABLES FOR RMDS
In November 2020, the IRS released new proposed life expectancy tables for calculating required minimum distributions (RMDs) from IRA and employer retirement accounts.
According to Ed Slott and Co. (www. irahelp.com), the IRS has finalized these tables, and they will go into effect on Jan. 1, 2022.
Every individual subject to annual RMDs will be affected — both owners of accounts and beneficiaries. Your calculations will change. The custodian of your account will likely use the new tables for your convenience. However, the responsibility for using the correct tables is with the owner or beneficiary, not the custodian.
Life expectancy has increased for both men and women, and the new tables reflect that. As a consequence, RMD amounts will be reduced somewhat. For most individuals, the change is modest; for newborns, there is a 2.2 year increase in life expectancy.
All three applicable tables have been updated. They include:
The Uniform Lifetime Table. This table is used to calculate lifetime RMDs for an account owner’s own IRA or retirement plan.
The Joint Life and Last Survivor Expectancy Table. This table is used instead of the Uniform Lifetime Table when a spouse is the sole IRA or plan beneficiary and that spouse is more than 10 years younger than the plan owner or plan participant.
The Single Life Expectancy Table. Eligible designated beneficiaries (EDBs) — a surviving spouse, a disabled or chronically ill individual, an individual who is not more than 10 years younger than the IRA owner, or a child of the IRA owner who has not reached the age of majority — may elect to use this table based on their age in the year after the IRA owner’s death.
Note that under the SECURE Act, designated beneficiaries who do not meet the aforementioned eligibility requirements must deplete an inherited IRA following the 10-year rule.
The single life expectancy table is also used if an IRA owner dies after the required beginning date April 1 of the year the IRA owner turns 72 without naming a living beneficiary.
The single life expectancy table is also used to calculate annual RMDs for beneficiaries who inherited prior to the SECURE Act in 2020. This table should never be used by original account owners for calculating lifetime RMDs.
The RMD is required in 2021; you are allowed to postpone that RMD up to April 1, 2022, then you will be required to make two RMDs in 2022. If you choose that option, you are required to use the
pre-2022 table for your first RMD. You would use the new table for your second RMD, which is required by the end of
2022.
If you inherited an IRA or retirement plan as a non-spouse beneficiary prior to the initiation of the SECURE Act, then you didn’t have the option of recalculating your life expectancy table each year from the single life expectancy table. You were required to subtract one from the previous year’s factor to determine your required RMD.
Starting in 2022, you can no longer use the same factor you had been using to compute your required RMD. You have to reset that factor based on the new single life expectancy table. Your new factor will be based on your age when you initiated making RMD withdrawals.
For example, an individual who was age 26 when he started taking RMDs would have used a factor of 57.2 initially, and subtracted one each year after that to determine his RMD. The revised factor for a 26-year-old in the 2022 table is 59.2 (revised life expectancy). Assume it has been six years since he has been taking RMDs. In 2022, he should subtract 6 from 59.2, and use 53.2 as the new factor in 2022. In 2023, he would subtract one and use 52.2 as the new factor in 2023.
Tables for 2021 are available from IRS Publication 590-B. Tables for 2022 are available from the Federal Register.