The IRS is revisiting the calculations used to determine required minimum distributions from retirement plans, annuities and IRAs.
The agency issued a notice of proposed rulemaking on Friday and scheduled a public hearing for Jan. 23, 2020 to consider adjusting its life expectancy and applicable distribution tables, which are used to calculate RMDs.
Under the proposal, the IRS’s tables would reflect increasing longevity among retired individuals – for example, at 70 years old, an IRA owner must use a life expectancy of 27 years under existing regulation, but under the proposal, the same IRA owner would use a life expectancy of 29.1 years to calculate their RMDs.
Some of the mortality assumptions currently used in the IRS’s tables are based off of life expectancy information from 2002 and 2003.
Using a longer life expectancy to calculate RMDs should result in lower distributions.
The proposed changes follow an Aug. 31, 2018 executive order which directed Treasury Secretary Steven Mnuchin to re-examine the IRS’s tables for RMDs and determine whether they should be updated and whether updates should be made continually on an annual or other periodic basis.
Stakeholders will have until Jan. 7, 2020 to submit written comments on the proposal.
If approved, the proposed changes would take effect for distribution calendar years beginning in 2021.