The IRS has issued Notice 2024-35, which provides guidance concerning certain required minimum distributions (RMDs) for 2024 (see Practice Note, Required Minimum Distributions from Retirement Plans). Notice 2024-35 also states that final regulations regarding RMDs will not apply before the 2025 distribution calendar year.

As background, the SECURE Act modified the post-death RMD requirements for defined contribution plans and IRAs by adding Internal Revenue Code Section 401(a)(9)(H), which limits the ability of beneficiaries to take distributions over a period not extending beyond the beneficiary's life expectancy (see Legal Update, Government Funding Legislation Includes the SECURE Act, Which Changes Retirement Plan Requirements: Plan Distributions and Practice Note, Required Minimum Distributions from Retirement Plans: SECURE Act Changes Post-Death Distributions for Defined Contribution Plans and IRAs). Now, if a participant in a defined contribution plan or IRA dies before their entire interest is distributed, the designated beneficiary generally must take the inherited interest within ten years of the participant's death (ten-year rule) (26 U.S.C. § 401(a)(9)(H)(i)). However, the ten-year rule does not apply if the distribution is made to an eligible designated beneficiary and certain conditions are met. This change is generally effective for distributions made for participants who die after December 31, 2019.

In February 2022, the IRS issued proposed regulations that would amend the RMD regulations to reflect the SECURE Act changes (87 Fed. Reg. 10504 (Feb. 24, 2022); see Legal Update, Proposed Required Minimum Distributions (RMD) Regulations Reflect SECURE Act Changes). Under the proposed regulations:

The proposed regulations would apply for RMDs for calendar years beginning on or after January 1, 2022.

In response to the proposed regulations, commenters indicated they had expected the ten-year rule to apply differently than what was set out in the proposed regulations (that is, no distributions would be required until the end of the ten-year period). Instead, the proposed regulations would require annual distributions, with the entire benefit needing to be distributed by the end of the ten-year period. As a result, some commenters who were beneficiaries of participants who died in 2020 did not take distributions in 2021 and were not sure if they needed to take distributions in 2022.

The IRS issued Notice 2022-53 to address commenters' concerns (see Legal Update, IRS Issues Guidance Regarding 2021 and 2022 Required Minimum Distributions). In Notice 2022-53, the IRS:

The IRS extended this relief in Notice 2023-54 regarding certain RMDs for 2023 (see Legal Update, IRS Provides Relief and Guidance Related to RMDs in Notice 2023-54). In Notice 2023-54, the IRS also indicated that final regulations regarding RMDs would not apply before the 2024 distribution calendar year.

Notice 2024-35 states that final regulations regarding RMDs will not apply before the 2025 distribution calendar year.

Additionally, regarding RMDs for 2024, the guidance provides that:

The guidance defines a specified RMD as "any distribution that, under the interpretation included in the proposed regulations, would be required to be made … under a defined contribution plan or IRA that is subject to the rules of § 401(a)(9)(H)[,]" in 2024 to:

This means that beneficiaries subject to the ten-year rule have another year of further relief for owners who died in 2020, 2021, 2022 or 2023 or after the owner's RBD.

Notice 2024-35 extends prior relief in Notices 2023-54 and Notice 2022-53 for another year. Practitioners should also be on the lookout for finalized regulations which should apply to determine RMDs for calendar years beginning on or after January 1, 2025.