On November 6, 2020, the Internal Revenue Service ("IRS") announced final regulations updating the life expectancy and distribution period tables that are used to calculate required minimum distributions from tax-favored retirement arrangements, including qualified retirement plans, Internal Revenue Code ("Code") Section 457 eligible deferred compensation plans, and Code Section 403(b) tax-sheltered annuities, as well as individual retirement accounts and annuities. The IRS had previously issued proposed regulations in November of 2019, pursuant to which the updated life expectancy tables and uniform lifetime table would have been applicable to distribution calendar years beginning on or after January 1, 2021. However, under the final regulations, the updated life expectancy tables and uniform lifetime table will apply for distribution calendar years beginning on or after January 1, 2022. The final regulations are scheduled to be published in the Federal Register on November 12, 2020.
The current uniform lifetime tables had not been updated since 2002. In updating this guidance, the Treasury Department and the IRS examined the life expectancy and distribution period tables in existing §1.401(a)(9)-9 and reviewed currently available mortality data. As a result of this review, the Treasury Department and the IRS determined those tables should be updated to reflect current life expectancies. The life expectancy tables and applicable distribution period tables in the final regulations generally reflect longer life expectancies than the tables in existing §1.401(a)(9)-9. The effect of these changes will be to reduce required minimum distributions generally, which will allow participants to retain larger amounts in their retirement plans to account for the possibility they may live longer.
While the life expectancy tables in existing §1.401(a)(9)-9 are used in several numerical examples in other provisions of the §1.401(a)(9) regulations, the final regulations do not include revised examples to reflect the updated life expectancy tables. The IRS expects to update these examples as part of the broader update of the §1.401(a)(9) regulations to take into account amendments under the Setting Every Community Up for Retirement Enhancement ("SECURE") Act.
The final regulations also do not provide for automatic updates to the life expectancy and distribution period tables. The Treasury Department and the IRS currently anticipate that they will review the tables at the earlier of: (1) 10 years or (2) whenever a new study of individual annuity mortality experience is published.
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