One of the positive outcomes of the new IRS final SECURE Act regulations on required minimum distributions (RMDs), released on July 18, is that more beneficiaries will be able to stretch RMDs over their lifetime.
Under the 2020 SECURE Act, only a certain class of individual beneficiaries – eligible designated beneficiaries (EDBs) – of IRAs and company plan accounts can use the stretch. Individual beneficiaries who are not EDBs must instead now use a 10-year payment rule.
Under the SECURE Act, EDBs are designated beneficiaries who are:
The final regulations don’t expand these categories. But the regs do make it easier for certain people to fit into one of these categories:
In the final regulations, the IRS provides an alternative definition that can be used when the beneficiary is under age 18 when inheriting an IRA or plan account. This alternative definition replaces the requirement that the beneficiary’s impairment makes it impossible for him to perform any job with a requirement that the impairment causes severe functional limitations. The alternative definition should make it easier for young beneficiaries to meet the “disability” standard and become an EDB.
Wouldn’t a disabled child under 18 automatically qualify as an EDB on
account of being a minor? Yes, but a disabled child who turns 21 would
remain an EDB, while a child not disabled would become a non-EDB and
become subject to the 10-year payment rule at age 21.
The final regulations also say that someone who has been found to be disabled by the Social Security Administration is automatically considered to be an EDB.
These rules raised privacy concerns. In response, the IRS completely waived the certification requirement for IRA beneficiaries. For plan beneficiaries, the IRS said the certification “need not be overly detailed” and can be satisfied without providing backup documentation such as medical records. In addition, a disabled or chronically ill beneficiary who inherited a plan account in 2020-2023 and did not provide the required certification by the October 31 deadline has until October 31, 2025 to do so.
IRS Final Regulations Loosen Definition of “Eligible Designated Beneficiary”
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