Are RMDs Required for Those Who Turned 70 1/2 in 2019?

Experts from Groom Law Group and Cammack Retirement Group answer questions concerning retirement plan administration and regulations.

“We are an ERISA 403(b) plan sponsor with a question about the SECURE Act (NOT the CARES Act). If we are reading the law correctly, the increase in the age for required minimum distributions (RMDs) for retirees from age 70 ½ to age 72, is NOT grandfathered, meaning that, if I have a participant who turned age 70 ½ in 2019, he/she must take an initial RMD by 4/1/2020. However, I have a retiree who turned age 70 ½ in the second half of 2019, meaning he/she will not turn 72 until 2021. Can that retiree skip the minimum required distribution for 2020, since he/she will not be 72 in 2020? Or must a 2020 distribution be taken for this retiree as well?”

Stacey Bradford, Kimberly Boberg, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, vice president, Retirement Plan Services, Cammack Retirement Group, answer:

Ah yes, the Setting Every Community Up for Retirement Enhancement (SECURE) Act—seems like it was passed so long ago! But it really was only about six months ago.  And, indeed your assertion that this SECURE Act provision is NOT grandfathered is correct. To answer your specific question, fortunately, the text of the SECURE Act does address this issue, as follows:


(d) Effective Date.—The amendments made by this section shall apply to distributions required to be made after December 31, 2019, with respect to individuals who attain age 70½ after such date.

So, the lack of grandfathering applies both to the age and the distributions themselves. Thus, any retiree who turned age 70 ½ in 2019 would have normally needed to take his/her initial RMD by 4/1/2020, and then will also need to take his/her 2020 RMD by 12/31/2020, regardless of whether or not he/she turns 72 in 2020.

However, with the recently passed Coronavirus Aid, Relief and Economic Security (CARES) Act, there are no longer any minimum distributions required in calendar year 2020. So, the individual who had turned 70 ½ in 2019 no longer has to take either his 2019 or his 2020 RMDs; minimum distributions would actually commence in 2021 for this individual.

To take advantage of the new age-72 rule under the SECURE Act, a retiree must be born on or after 7/1/1949 and thus turn 70 ½ on or after January 1, 2020. However, 403(b) plan sponsors should note that the requirement that the employee be retired is unchanged by the SECURE Act, so active employees may delay their minimum required distribution from a 403(b) plan until April 1 following the year of retirement, even if that employee is older than 70 ½ or 72 years of age, as applicable (there is an exception for 5% owners, but those individuals don’t exist in 403(b) plans).

Of course, an individual who turned 70 ½ on or after January 1, 2020, would not be required to take an RMD until 4/1/2022 at the earliest, so the CARES Act waiver of the 2020 distribution is moot.


NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.

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