IRS Provides Reporting Relief for IRAs Following SECURE 2.0 Change to Required Beginning Date | Practical Law

IRS Provides Reporting Relief for IRAs Following SECURE 2.0 Change to Required Beginning Date | Practical Law

IRS Notice 2023-23 provides reporting relief and guidance to financial institutions maintaining individual retirement accounts (IRAs) regarding the changes to IRA required minimum distributions (RMDs) under the SECURE 2.0 Act of 2022.

IRS Provides Reporting Relief for IRAs Following SECURE 2.0 Change to Required Beginning Date

by Practical Law Employee Benefits & Executive Compensation
Published on 08 Mar 2023 • USA (National/Federal)
IRS Notice 2023-23 provides reporting relief and guidance to financial institutions maintaining individual retirement accounts (IRAs) regarding the changes to IRA required minimum distributions (RMDs) under the SECURE 2.0 Act of 2022.
On March 7, 2023, the IRS issued Notice 2023-23, which provides reporting relief and guidance to financial institutions maintaining individual retirement accounts (IRAs) regarding the changes to the required beginning date for IRA required minimum distributions (RMDs) under the SECURE 2.0 Act of 2022 (SECURE 2.0). The relief applies to financial institutions that provide an RMD statement or a Form 5498 to an IRA owner who will attain age 72 in 2023.

SECURE 2.0 Increases the Age for the Required Beginning Date for IRA RMDs

The Consolidated Appropriations Act, 2023 (Pub. L. No. 117-328 (Dec. 29, 2022)), which includes SECURE 2.0, was enacted on December 29, 2022 (see Legal Update, SECURE 2.0 Act Makes Comprehensive Changes to Retirement Plans).
SECURE 2.0 increases the age for the required beginning date applicable to IRAs and other retirement plans. Under SECURE 2.0, RMDs from an IRA or employer-sponsored retirement plan must start on April 1 of the calendar year following the calendar year in which the individual attains age 73, rather than age 72, as was required before SECURE 2.0. This change is effective for distributions required to be made after December 31, 2022, with respect to individuals who turn 72 after December 31, 2022. Therefore, IRA owners who attain age 72 in 2023 will not have:
  • A required beginning date of April 1, 2024.
  • An RMD for 2023.
Instead, the required beginning date for IRA owners who attain age 72 in 2023 will be April 1, 2025.
If an IRA owner has an RMD due for 2023:
  • The financial institution that is the trustee, custodian, or issuer maintaining an IRA must file a 2022 Form 5498 by May 31, 2023. The financial institution must indicate in Box 11 of the Form that an RMD is required for 2023, and it may provide further information in Box 12a (RMD Date) and Box 12b (RMD Amount).
  • Under IRS Notice 2002-27, the financial institution must furnish an RMD statement to the IRA owner by January 31, 2023, that informs the IRA owner of the date the RMD is required and provides the amount of the RMD or offers to calculate that amount upon request.

Reporting Relief in Notice 2023-23

Due to the change in the required beginning date, financial institutions should not:
  • Send the RMD statement required under IRS Notice 2002-27 to IRA owners who will attain age 72 in 2023.
  • Include a check in Box 11 or entries in Box 12a or 12b in the 2022 Form 5498 for IRA owners who will attain age 72 in 2023.
However, Notice 2023-23 provides relief to financial institutions because they will have a short amount of time to change their systems to comply with SECURE 2.0. Specifically, if a financial institution provides an RMD statement to an IRA owner who will attain age 72 in 2023, including by providing a Form 5498, then the IRS will not consider that statement to have been provided incorrectly if the financial institution notifies the IRA owner no later than April 28, 2023, that no RMD is required for 2023.
Notice 2023-23 encourages financial institutions to remind IRA owners who attained age 72 in 2022 and have not yet taken their 2022 RMDs that they still must take those RMDs by April 1, 2023.

Practical Implications

Financial institutions that maintain IRAs should understand the relief provided under Notice 2023-23 if they erroneously provide an RMD statement or a Form 5498 to an IRA owner who will attain age 72 in 2023.
For a chart that displays summaries and effective dates of the retirement plan-related provisions in SECURE 2.0, see SECURE 2.0 Act Compliance Chart.