Retirement Savings Plans,For Individuals,For Plan Sponsors,Custom

IRS Releases First Guidance on SECURE Act

March 18, 2020

Many provisions of the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 Act became effective on January 1, 2020. Because of this, providers, plan sponsors and industry groups began to immediately seek guidance and relief from the Internal Revenue Service (IRS) and the Department of the Treasury following the SECURE Act 's enactment on December 20, 2019.

With the January 24, 2020 release of IRS Notice 2020-6, Relief for Reporting Required Minimum Distributions for IRAs for 2020, that guidance is beginning.

The Notice applies solely to IRAs, but it states that Treasury and the IRS are considering what additional guidance should be provided with respect to the SECURE Act, including guidance for plan administrators, payors, and distributees if a distribution to a plan participant or IRA owner who will attain age 70½ in 2020 was treated as an RMD.

By way of background, by January 31 of each year, an IRA trustee is required to provide, if applicable, a notice indicating that a required minimum distribution (RMD) is due for 2020 and the trustee must either provide the amount of the RMD or offer to calculate that amount upon request. (This notice requirement does not apply to plans.) Due to the SECURE Act, IRA owners turning age 70½ in 2020 no longer need to take an RMD with respect to 2020.

Notice 2020-6 states that, if a financial institution provides an RMD statement to an IRA owner who will attain age 70½ in 2020 (including by providing a Form 5498), then the IRS will not consider such a statement to have been provided incorrectly. However, that relief only applies if the IRA owner is notified by the financial institution no later than April 15, 2020 that no RMD is required for 2020.

Notice 2020-6 also states that the IRS encourages financial institutions to remind IRA owners who turned age 70½ in 2019, and who have not taken their 2019 RMDs, that they are still required to take those distributions by April 1, 2020. The Notice does not provide relief from the general requirement to provide a Form 5498 for 2019 by June 1, 2020.

We are proactively working to implement changes made by the SECURE Act and working with industry groups to obtain guidance and clarification from the IRS and Treasury on open issues. ICMA-RC will keep plan sponsors and participants apprised of updates with additional communications in 2020 and ongoing. For additional information on the SECURE Act provisions, please watch our recent webinar. Please contact your local ICMA-RC representative with any questions you may have.

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