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For someone born in 1959, is 73 or 75 the “applicable age” that sets a required beginning date?


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For someone born in 1959, is 73 or 75 the “applicable age” that sets a required beginning date?

The Consolidated Appropriations Act, 2023’s SECURE 2.0 Act of 2022 division includes this section 107:

SEC. 107.  INCREASE IN AGE FOR REQUIRED BEGINNING DATE FOR MANDATORY DISTRIBUTIONS. 

(a)   IN GENERAL.—Section 401(a)(9)(C)(i)(I) is amended by striking “age 72” and inserting “the applicable age”.

(b)  SPOUSE BENEFICIARIES; SPECIAL RULE FOR OWNERS.—Subparagraphs (B)(iv)(I) and (C)(ii)(I) of section 401(a)(9) are each amended by striking “age 72” and inserting “the applicable age”.

(c)  APPLICABLE AGE.—Section 401(a)(9)(C) is amended by adding at the end the following new clause:

“(v) APPLICABLE AGE.—

(I)  In the case of an individual who attains age 72 after December 31, 2022, and age 73 before January 1, 2033, the applicable age is 73.

(II) In the case of an individual who attains age 74 after December 31, 2032, the applicable age is 75.”.

(d)   CONFORMING AMENDMENTS.—The last sentence of section 408(b) is amended by striking “age 72” and inserting “the applicable age (determined under section 401(a)(9)(C)(v) for the calendar year in which such taxable year begins)”.

(e)   EFFECTIVE DATE.—The amendments made by this section shall apply to distributions required to be made after December 31, 2022, with respect to individuals who attain age 72 after such date.

Someone born in 1959 attains 73 in 2032, and attains 74 in 2033. Someone born in 1959 fits both clause (I) and clause (II).

Imagine six Congresses (for twelve years) begin and adjourn with no enactment of any revision.

Is there any reading of this statute that harmonizes clause (I) and clause (II)? If not:

Is age 73 or age 75 the applicable age for someone born in 1959. What is the reasoning for your choice?

And here’s a perhaps more immediate question:

A summary that explains a plan—whether a summary plan description or a summary of material modifications—must “be written in a manner calculated to be understood by the average plan participant, and shall be sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan. A summary of any material modification in the terms of the plan . . . shall be written in a manner calculated to be understood by the average plan participant[.]” ERISA § 102(a), 29 U.S.C. § 1022(a).

How would a summary you write explain the “applicable age” that sets a required beginning date?

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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FWIW...As currently written, I'd go with the age 73 (being of an essentially conservative mindset on such issues). Why? 'Cause given two possible interpretations, I'd choose what is, to my way of thinking, the "safer" approach - don't miss an RMD!

I have no idea how the summary would look - I'm nowhere near the point of that level of detail. And I frankly expect the IRS will either (a) even if unoficially, opine as to how this should be interpreted, or (b) have to live with either interpretation.

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Belgarath, thank you for contributing your thoughts.

I consider these questions from the perspective of a retirement plan’s administrator (the named fiduciary, not a third-party administrator).

If 2033 arrives with no correction from Congress (and no Treasury department rule that binds a plan’s administrator), I’m not sure it’s cautious to compel an involuntary distribution, which might be contrary to a participant’s or beneficiary’s right to preserve her retirement savings.

About a summary plan description (a task I’m working on now), I’ll explain the provision for those born in 1958 and earlier, explain it for those born in 1960 and later; state that there is an ambiguity for those born in 1959, and inform that the plan’s administrator intends not to decide an interpretation until it becomes necessary.

BenefitsLink neighbors, other thoughts?

A Treasury department interpretation or tolerance seems somewhat likely. SECURE 2.0 includes not only the change from age 72 to age 73 or 75 but also other nuances about minimum-distribution provisions. Treasury could include these points in a revision of its pending proposed rulemaking.

BenefitsLink neighbors, any predictions?

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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I predict that this will be addressed when the IRS finalizes the RMD regulations that were proposed last year.

Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance.

Corey B. Zeller, MSEA, CPC, QPA, QKA
Preferred Pension Planning Corp.
corey@pppc.co

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I think it's 75. Clearly the intent. They don't reach 74 until 2033, so they're over the wire.

This is one that flew right by me reading the bill. There are many more obvious problems with much of the language that I did catch.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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Of course, when 2033 rolls around, I'll be retired, so whether they fix it or not won't really matter to me... a pleasant thought! 

As to the SPD issue - Peter, your diligence does you great credit, and I admire that! But I'm lazier, and unless something changes my mind, I won't be worrying about a current SPD/SMM  attempting to address this issue yet. When it comes to restating Cycle 4 documents (and probably Cycle 2 403(b)), or SECURE Amendments,  if the IRS hasn't provided guidance, I (or my replacement here) will worry about it then. We use pre-approved documents anyway, so the document providers may or may not address this issue.

Perhaps I'm taking too relaxed a position on this...

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5 hours ago, G8Rs said:

I predict, and expect, a technical correction to the law well before it becomes effective. 

Given that age 75 becomes effective 10 years from now, that's probably a safe bet. I'll be willing to take bets it won't happen in the next two years, though.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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