IRS Issues Final Regulations Updating Minimum Required Distribution Rules

On November 5, 2020, the Internal Revenue Service ("IRS") released final regulations under section 401(a)(9) of the Internal Revenue Code ("IRC").  85 Fed. Reg. 72472 (Nov. 12, 2020).  The final regulations, which closely follow proposed regulations issued on November 8, 2019, reduce the required distribution amounts from qualified defined contribution plans and individual retirement accounts that generally apply annually after a participant reaches his or her required beginning date.

The amount that is required to be distributed each year is based on an estimate of the expected remaining lifetime of the participant and his or her beneficiary.  Compared to the current regulations, which were adopted in 2002, the new regulations generally increase the expected remaining lifetimes of participants and beneficiaries for minimum distribution purposes.  This change will tend to reduce the amounts that need to be distributed each year.