Overview
On April 16, 2024, the Internal Revenue Service (IRS) made available Notice 2024-35 which provides important guidance relating to certain specified required minimum distributions (RMDs) for 2024. Additionally, the Notice announces the forthcoming final RMD regulations from the Department of the Treasury and the Internal Revenue Service (IRS), which will be applicable for determining RMDs for calendar years starting on or after January 1, 2025.
IRA beneficiary relief
Similar to the relief granted under Notice 2022-53 and Notice 2023-54 applicable to certain IRA beneficiaries (i.e., designated beneficiaries and designated beneficiaries of eligible designated beneficiaries) that failed to take an RMD in 2021, 2022, and/or 2023, Notice 2024-35 provides relief for the same beneficiaries that fail to take an RMD in 2024. The Notice specifically indicates that beneficiaries who do not take specified RMDs will not face an excess accumulation tax under Internal Revenue Code (IRC) § 4974. A specified RMD is defined by the IRS as any distribution that, under the interpretation included in proposed regulations, would be required to be made to such beneficiary. For example, if an IRA owner died in 2023 on or after his or her RBD and had named his or her daughter (i.e., a designated beneficiary) as his or her IRA beneficiary, the proposed regulations require annual life expectancy distributions beginning in 2024 with a distribution of the balance by December 31, 2033 (i.e., the 10-year rule). In this example, the Notice relieves the beneficiary of the § 4974 tax if she fails to take the 2024 RMD.
Final RMD regulations
In February 2022, the IRS published proposed regulations clarifying and providing guidance on the RMD rule changes made by the SECURE Act. On a side note, the IRS indicates in Notice 2024-35 that final regulations and related provisions will apply to determining RMDs for calendar years beginning no earlier than 2025.
Conclusion
Notice 2024-35 serves as an important update for IRA owners, IRA beneficiaries, and IRA custodians and trustees, providing clarity on RMD requirements and upcoming regulations. It offers relief for missed distributions and outlines the expected applicability of final regulations, ensuring compliance and informed financial planning.
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