Congress Gifts SECURE 2.0

Happy Holidays! Congress Gifts SECURE 2.0

By Sarah Brenner, JD
Director of Retirement Education

This holiday season Congress has given us SECURE 2.0. With no time to spare to avoid a government shutdown, they passed the $1.7 trillion Consolidated Appropriations Act of 2023 and sent it off the President for signature. Tucked inside the more than 4000 pages of legislation, you can find SECURE 2.0.

While this "Son of SECURE" is not exactly the game changer for IRAs that its "Dad" (the original SECURE Act) was, there are still many changes that will affect IRA owners and beneficiaries. For employer plans, there are significant changes. Not everything is effective for 2023. Some provisions are delayed for a few years.

Here are some highlights:


Q: Ed, I started reading your newsletter and I wondered what you thought of IRS Notice 2022-53. It made sense to me to the point where it said that "the beneficiary of an employee who died after the employee's required beginning date must take the RMD beginning in the first calendar year after the calendar year of the employee's death."

But then in the end they lost me when it says it applies only if the employee died in 2020 or 2021. Seems like it should say 2022 as well.

This is of concern to me because I don't want to take the RMD this year, and my dad died this year leaving me his IRA in respect of which he had started taking RMDs.


Q: I have read with interest, Ian Berger's article titled "IRS Waives 50% Penalty for Missed 2021 and 2022 RMDs within the 10-Year Period." I am glad that this is starting to be clarified by the IRS. Has any guidance been provided yet on how to calculate the future RMDs?My father passed away in March of 2020 and I was a beneficiary of his IRA. If I had an inherited IRA with any value on Dec 31, 2021, I assume that I would not need to take an RMD in 2022 (nor in 2021.) I assume that if the value on December 31, 2022 is $100,000, I will have 8 years to take the distributions, starting in the 2023 tax year? Would the RMD be calculated at 1/8 of the balance, $12,500?


Q: I have been doing Roth conversions this year from two small accounts (one a rollover IRA, the other a SEP-IRA) to consolidate into fewer accounts. The small SEP-IRA has been drained this year (2022) by converting the balance to my Roth. The rollover IRA was reduced by one third this year, and the rest should be converted to the Roth in early 2023.

My question comes from the fact that I will turn 72 in July of 2023, so I must begin RMDs in 2023 based on December 2022 balances. If I finish draining/converting the rollover IRA in early 2023, will my RMDs be based on the December 31, 2022 balance? If I convert the balance in early 2023, will I still have an RMD? It seems unfair to be forced to take RMDs from an empty account based on the balance the previous year. But I can't find anything that says otherwise.


Q: Do adult children who inherited a parent's Roth IRA in 2020 need to take an RMD each year during the 10-year payout rule or may they leave it alone and deplete the account at the end of the 10th year? I've heard it both ways and would like to know which is correct.


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