Relief for Financial Institutions that Incorrectly Report IRA Required Minimum Distributions

NSTPInternal Revenue Service (IRS)

Relief for Financial Institutions that Incorrectly Report IRA Required Minimum Distributions

Relief for Financial Institutions that Incorrectly Report IRA Required Minimum Distributions

The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), among other items, changed the requirement for minimum distributions from qualified plans and IRAs. With the December 20th enactment date, financial institutions have had only a short time to change their systems. In Notice 2020-6, the IRS has provided relief for financial institutions that send a statement to an IRA owner, e.g., on Form 5498 (IRA Contribution Information), stating that the owner who turns 70½ in 2020 has a 2020 required minimum distribution (RMD) requirement.

The new required beginning date for an IRA owner is April 1 of the calendar year following the calendar year in which the individual attains age 72; formerly, it was April 1 of the calendar year following the calendar year in which the individual attains age 70½. This amendment to Code Sec. 401(a)(9) is effective for distributions required to be made after December 31, 2019, with respect to individuals who will attain age 70½ after that date. As a result of this change, IRA owners who will attain age 70½ in 2020 will not have a required beginning date of April 1, 2021. This also means that these IRA owners (who, prior to enactment of the SECURE Act, would have been required to take minimum distributions from their IRAs for 2020) will have no RMD for 2020.

In Notice 2020-6, the IRS notes that the RMD statement required under Notice 2002-27 should not be sent to IRA owners who will attain age 70½ in 2020.

However, in recognition of the short amount of time after the enactment of the SECURE Act that financial institutions have had to change their systems for furnishing the RMD statement, relief is being provided. Under this relief, 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 IRS will not consider such a statement to have been provided incorrectly, but only if the IRA owner is notified by the financial institution no later than April 15, 2020, that no RMD is required for 2020.

The SECURE Act did not change the required beginning date for IRA owners who attained age 70½ prior to January 1, 2020. In order to reduce misunderstanding among IRA owners, IRS encourages all financial institutions, in communicating these RMD changes, to remind IRA owners who attained age 70½ in 2019, and have not yet taken their 2019 RMDs, that they are still required to take those distributions by April 1, 2020.