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The SECURE Act Changes RMD Age and Distribution Rules

The law governing Required Minimum Distribution (RMD) rules recently changed. Until this year, Wespath participants were required to begin retirement plan distributions by April 1 following the later of the year they turned age 70½, retired or terminated. Beginning January 1, any participant who had not yet turned 70½ will be required to begin retirement plan distributions by April 1 following the later of the year they turn age 72, retire or terminate.1

image of a calendar

That is not the only change. The Act also changed the way beneficiaries are allowed to take distributions from a deceased participant’s account. Formerly, designated beneficiaries could receive an inherited account balance over their life expectancy. Now, beneficiaries of a participant who dies on or after January 1, 2020 must receive the entire account balance within 10 years. Exceptions apply for surviving spouses, as well as beneficiaries who are disabled or chronically ill, were born within 10 years of the participant, or are minor children (their 10-year limit begins when they reach the age of majority).

As a courtesy, Wespath notifies participants and beneficiaries well in advance of the date their RMDs must begin. We also automatically distribute RMDs by the required date to help ensure compliance with legal requirements, since late RMDs are subject to a 50% penalty.

We are working with our vendor to update our systems to reflect the new rules as soon as possible. Notification to participants and beneficiaries will be adjusted to reflect these rules.

1 If a participant’s required beginning date changes to age 72, the required beginning dates for related surviving spouses, alternate payees and non-spouse beneficiaries will also be impacted.

Please note:

Shortly after the SECURE Act was enacted, the RMD rules were modified again by the CARES Act (enacted on March 27, 2020). The CARES Act waives RMDs from defined contribution plans in the year 2020. See this document for more information.

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