When Do RMDs Have to Start and What Is Maximum Normal Retirement Age?

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

“I read with interest your Ask the Experts Column stating that the maximum normal retirement age in a 457(b) plan for purposes of the last-three-years special catch-up election under 457(b)(3) has not yet increased from age 70.5 to age 72. Does this mean that the required beginning date for commencement of required minimum distributions has not increased from 70.5 to 72, either?”

Charles Filips, Kimberly Boberg, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

No, because the regulatory language is different in this regard. Let’s take a look at the relevant Internal Revenue Code sections, shall we?
IRC Section 457(d)(2):
(2)Minimum distribution requirements
A plan meets the minimum distribution requirements of this paragraph if such plan meets the requirements of section 401(a)(9).

From Section 401(a)(9)(C):
(C) Required beginning date.-For purposes of this paragraph-
(i) In general.-The term “required beginning date” means April 1 of the calendar year following the later of-
(I) the calendar year in which the employee attains age 72, or
(II) the calendar year in which the employee retires.

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Thus, unlike the 457(b) regulation language on normal retirement age, which directly states an age (70.5) that is the latest age it can be, the IRC Section 457(b) language on RMDs incorporates Section 401(a)(9) by reference, which has been updated to increase the age for the required beginning date from age 70.5 to age 72. This subtle difference explains why the required minimum distribution commencement age is 72, while the maximum normal retirement age remains at 70.5 for now.

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.

Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to Amy.Resnick@issgovernance.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future column.