IRA & Pension Planning    

New IRS Rules for IRA Distribution

• A simple Uniform Table is to be used for all employees. Regardless of the age of a designated beneficiary, IRA owners will use the same table. The age of the beneficiary will not make a difference, except for a spouse who is more than 10 years younger than the account owner.

• There will be no decision to recalculate or not recalculate life expectancy. With the 1987 proposed regulation method, the potential for recalculating for both the owner and the designated beneficiary created four different option possibilities. Even with sophisticated software, it was difficult to make rational comparisons of the benefits and detriments of the different options. Thus, the new, single table uses recalculation for the account owner to calculate the minimum distribution. Please see the Uniform Table of distribution calculations  below.

  

• It is now possible to change the beneficiary at any time. Under the current rules, changing a beneficiary can lead to larger distributions, but never smaller distributions, even if the new beneficiary has a longer life expectancy. The new system will allow complete freedom to select designated beneficiaries, with no impact on the minimum distribution requirement.
• The beneficiary must be determined by the end of the year following the death of the owner. This provision allows for disclaimers and cashing out of some beneficiaries. The "Stretch IRA" may then be available for the remaining beneficiaries.
• Distributions at death will generally be permitted over the remaining life expectancy of the owner or the life expectancy of a designated beneficiary, whichever period of time is greater. Generally, this new method will reduce required distributions for the vast majority of IRA owners and beneficiaries.

Back