IRS Updates Life Expectancy and Distribution Period Tables Used in Determining RMDs

The IRS on Nov. 6 issued final regulations that update the life expectancy and distribution period tables used for purposes of determining required minimum distributions (RMDs). 

These regulations affect participants, beneficiaries and plan administrators of these qualified retirement plans and other tax-favored employer-provided retirement arrangements, as well as owners, beneficiaries, trustees and custodians of IRAs and annuities. 

On Nov. 8, 2019, the Treasury and the IRS had published proposed regulations (REG-132210-18) under Internal Revenue Code Section 401(a)(9) in the Federal Register (84 FR 60812) (the proposed regulations) setting out updated life expectancy and distribution tables. The IRS adjusted the regulations after it considered the written comments it received on the proposed regulations.

What the Regulations Do

These final regulations set guidance relating to the life expectancy and distribution period tables that are used to calculate RMDs from qualified retirement plans, IRAs and annuities, and certain other tax-favored employer-provided retirement arrangements. 

In accordance with Executive Order 13847, the Treasury Department and the IRS have examined the life expectancy and distribution period tables in formerly applicable Treas. Reg. §1.401(a)(9)-9 and have reviewed currently available mortality data. As a result, the Treasury and the IRS have determined that those tables should be updated to reflect current life expectancies. Accordingly, the final regulations update those tables; the life expectancy tables and applicable distribution period tables in these regulations generally reflect longer life expectancies than the tables in formerly applicable Treas. Reg. §1.401(a)(9)-9.

The regulations also: 

• Amend the Income Tax Regulations (26 CFR part 1) under Internal Revenue Code Section 401(a)(9) regarding the requirement to take RMDs from qualified trusts. 
• Apply regarding the corresponding requirements for IRAs, annuities and eligible deferred compensation plans under Internal Revenue Code Section 457, as well as Code Section 403(a) and 403(b) annuity contracts, custodial accounts and retirement income accounts.
• Update the Joint and Last Survivor Table that sets forth joint and last survivor life expectancies of an employee and the employee’s beneficiary for each combination of ages of those individuals. The final regulations update the resulting joint and last survivor life expectancy by increasing it by 11/24 to approximate the effect of monthly payments and is subject to a floor of 1.0.
• Include a transition rule that applies if an employee died before Jan. 1, 2022, and, under the rules of Treas. Reg. §1.401(a)(9)-5, Q&A-5, the distribution period that applies for calendar years following the calendar year of the employee’s death is equal to a single life expectancy calculated as of the calendar year of the employee’s death (or if applicable, the year after the employee’s death), reduced by 1 for each subsequent year. 
• Illustrate the application of this transition rule with an example involving an employee who died at age 80 in 2019 with a designated beneficiary (who was not the employee’s spouse) who was age 75 in the year of the employee’s death and who continues to be alive until at least 2022. For 2020, the distribution period that applies for the beneficiary is 12.7 years (the period applicable for a 76-year-old under the Single Life Table in formerly applicable §1.401(a)(9)-9), and for 2021, it is 11.7 years (the original distribution period, reduced by 1 year). For 2022, taking into account the life expectancy tables under these regulations and applying the transition rule, the applicable distribution period would be 12.1 years (the 14.1-year life expectancy for a 76-year-old under the Single Life Table in these regulations, reduced by two years).

Effective and Applicability Dates 

These final regulations are effective on the date they are published in the Federal Register, which is scheduled to take place on Nov. 12, 2020. 

These final regulations apply to distribution calendar years (as defined in Treas. Reg. §1.401(a)(9)-5, Q&A-1(b)), beginning on or after Jan. 1, 2022.

The life expectancy tables and Uniform Lifetime Table under these regulations apply for distribution calendar years beginning on or after Jan. 1, 2022.