Peter Gulia Posted July 19 Share Posted July 19 Internal Revenue Code of 1986 (26 U.S.C.) § 401(a)(9)(C)(v) provides: “(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.” This morning’s notice of a final rule to interpret § 401(a)(9) reserves how to interpret that ambiguity, and refers to this morning’s notice of proposed rulemaking. Footnote 7 on page 58891, page 58911 (publishing to-be-codified 26 C.F.R. § 1.401(a)(9)–2(b)(2)(v) [Reserved]). In that notice, the Treasury department proposes to set the applicable age for someone born in 1959 as 73. But the notice explains no reason for Treasury’s choice of 73, rather than 75. BenefitsLink neighbors, if it were your job in the Treasury department to choose 73 or 75 (or something else) and to write a reasoning that explains your choice as the best interpretation of the statute, would you choose: 73? 75? 74? And, most important, why? If you could ground your choice on a canon of statutory construction, which would you use? And if not some legal-sounding reasoning, what explanation could you give that still respects the idea that the Treasury department must seek to give effect to Congress’s intent? Luke Bailey 1 Peter Gulia PC Fiduciary Guidance Counsel Philadelphia, Pennsylvania 215-732-1552 Peter@FiduciaryGuidanceCounsel.com Link to comment Share on other sites More sharing options...
david rigby Posted July 19 Share Posted July 19 Intent aside, why not a full assault on the statute-writing people (ie, Congress) to fix it? When the statute is clearly in error, or contains a significant ambiguity, a regulatory interpretation is not the best remedy. Peter Gulia 1 I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice. Link to comment Share on other sites More sharing options...
Paul I Posted July 19 Share Posted July 19 Subparagraph (I) sets the RMD at age 73 for someone born in 1959, so regardless of what Subparagraph (II) says the person has an RMD due for the 2032 plan year. The conundrum is (II) says that same person turns age 74 in the 2033 plan year so the person has an RMD due for the 2034 plan year. Arguably as written, a person born in 1959 gets to skip an RMD for the 2033 plan year, or a person born in 1959 must have an RMD for the 2033 plan year because RMDs began under (I). Had (II) been written to say it supersedes (I), then there is a skip. If (II) does not supersede (I), then there is no skip. I don't think any of this has to do with Congressional intent other than Congress was looking at ways to balance out the revenue impact of the overall package. They look at a 10-year horizon for their impact analysis which would explain why the change to 75 was set for year 2033 - 10 years after the adoption of SECURE 2.0. Considering the potential impact of the recent decision on Chevron, the IRS should either hope for a clarifying amendment or go with the skip. Luke Bailey and Peter Gulia 1 1 Link to comment Share on other sites More sharing options...
Peter Gulia Posted July 19 Author Share Posted July 19 Thank you, David Rigby and Paul I. For the notice of proposed rulemaking, what to do about the 59ers is one of several open issues. That the notice includes this issue doesn’t mean the Treasury must decide it soon. If Congress amends the statute by December 2032, it might be unnecessary for Treasury to do anything. There’s almost 8½ years, and four Congresses after the current Congress. For those who know the political process, it might make some sense to say a practical sign of Congress’s intent is that a text means what the budget scorers assumed it to mean when they made their report on a bill’s revenue effects. (For those who might be amused, I attach the Joint Committee on Taxation’s report on the “Revenue Effects” of what became SECURE 2022. In that report, the last year of the budget window is FY 2032—that is, October 1, 2031 to September 30, 2032.) But I doubt a Federal judge would find she ought to interpret I.R.C. § 401(a)(9)(C)(v) according to the budget scorers’ assumptions. First, a court might not know what the estimators assumed because it might be impractical for a court to get testimony or other evidence about those facts. And even if one could get useful evidence, the budget scorers’ assumptions about what the text means could have been mistaken. Even if law that governs Congress’s lawmaking procedures calls for Congress to have received (and ostensibly to have considered) a revenue-effects report before voting on a bill, the servants do not dictate to Congress what Congress’s text means. Now that a court no longer defers to, but might be persuaded by, an executive agency’s interpretation, Treasury’s task in making an interpretive rule (if the agency tries to do anything on this 59er issue) ought to seek the best interpretation of the statute, with reasoning that would persuade a court. BenefitsLink neighbors, to resolve § 401(a)(9)(C)(v)’s ambiguity, are there other ideas for interpreting the statute? revenue effects x-21-22.pdf Peter Gulia PC Fiduciary Guidance Counsel Philadelphia, Pennsylvania 215-732-1552 Peter@FiduciaryGuidanceCounsel.com Link to comment Share on other sites More sharing options...
Patty Posted July 19 Share Posted July 19 A May 23, 2023, letter by two senators and two representatives said they were going to correct this: "Section 107 of SECURE 2.0 increases the age at which required minimum distributions from a retirement plan are required to begin. Specifically, it changes the age on which the required beginning date for required minimum distributions is based (the “applicable age”). Congress intended to increase the applicable age from age 72 to age 73, for individuals who turn 72 after December 31, 2022 and who turn 73 before January 1, 2033, and to increase the applicable age from age 73 to age 75 for individuals who turn 73 after December 31, 2032. However, with respect to the increase from age 73 to age 75, the provision could be read to apply such increase to individuals who turn 74 (rather than 73) after December 31, 2032, which is inconsistent with Congressional intent." A draft tech corrections bill was prepared. Those are both pretty clear that 59'ers are age 73'ers, I am personally sad to say. But it appears that IRS is not going to change it until a tech corrections bill is actually passed. Technical Corrections Bill 12-6-2023.pdf 5-23-2023 Letter from Congress to IRS on SECURE 2.0 errors.pdf Peter Gulia 1 Link to comment Share on other sites More sharing options...
Peter Gulia Posted July 19 Author Share Posted July 19 Patty, thank you for your useful reminder. Many courts would say: An expression of some Members of Congress, even if they are four ranking Members, does not state the intent of the Congress. Something written after the enactment does not state what was the intent of the Congress when the Members voted. A technical-corrections “discussion draft” has no effect until the Congress enacts it as law (which seems unlikely in the 118th Congress). If nothing is done this year, there’s another four Congresses (eight years) before the ambiguity might result in an involuntary distribution that might have been unnecessary. Peter Gulia PC Fiduciary Guidance Counsel Philadelphia, Pennsylvania 215-732-1552 Peter@FiduciaryGuidanceCounsel.com Link to comment Share on other sites More sharing options...
Luke Bailey Posted October 31 Share Posted October 31 I think the right answer is 73. A person born in 1959 would attain age 73 in 2032, so there you are. It's 73. Even though the same person will attain age 74 after December 31, 2032, you don't skip 2032 because what is being determined is the "required beginning date" for a continuous stream of distributions. Peter Gulia 1 Luke Bailey Senior Counsel Clark Hill PLC 214-651-4572 (O) | LBailey@clarkhill.com 2600 Dallas Parkway Suite 600 Frisco, TX 75034 Link to comment Share on other sites More sharing options...
Belgarath Posted October 31 Share Posted October 31 This is absolutely not intended to sound dismissive or snarky, but on a personal level, I find it hard to care at this point. There are so many immediate and difficult technical and administrative issues to deal with, and this particular issue doesn't take effect one way or the other for many years. Given recent legislative history and trends, there will be lots of tinkering before then anyway... Peter Gulia 1 Link to comment Share on other sites More sharing options...
Peter Gulia Posted October 31 Author Share Posted October 31 And I don’t read your note as in any way dismissive. For employer/administrators, third-party administrators, and recordkeepers, this point is much less immediate and less important than many other difficulties with SECURE 2019 and SECURE 2022. And as I mentioned twice, even if the current Congress does nothing, there’s another four Congresses and eight years until a more restrictive interpretation would result in an involuntary distribution. Because Congress’s SECURE Acts and others have so many ambiguities is why I think it’s worthwhile for some of us to think about methods for interpreting statutes. Our norm now is making tax law in haste, often with little or no attention in committee hearings, and—in the throes of when a budget-reconciliation or appropriations bill can move (often in December)—with few days and hours to edit a text. When it’s usual for a statute to bear hundreds of ambiguities, having general frameworks for interpreting them can help. Some of us have a little luxury to indulge some thinking about text-interpretation methods. And I recognize many don’t have that time or taste. By opening a question to our BenefitsLink neighbors, Paul I and Luke Bailey graced me with interpretations and reasoning I might not have thought of. Belgarath 1 Peter Gulia PC Fiduciary Guidance Counsel Philadelphia, Pennsylvania 215-732-1552 Peter@FiduciaryGuidanceCounsel.com Link to comment Share on other sites More sharing options...
Belgarath Posted October 31 Share Posted October 31 Interesting points. As a non-lawyer, I have wondered about the long-term effects of the (Loper?) decision, as to challenges to regulatory rules and interpretations, reliance on those regulations, etc., etc. - with any luck, I'll be retired before the excrement hits the windmill in any major volume. Luke Bailey 1 Link to comment Share on other sites More sharing options...
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