IRS Issues Proposed Revisions to Factors Used to Compute Required Minimum Distributions
In response to an Executive Order issued on August 31, 2018,[1] the IRS has now released proposed regulations updating the life expectancy tables to be used in computing required minimum distributions from retirement plans.[2] The new tables are proposed to be used beginning in 2021.
The preamble to the proposed regulations describes the change to the IRS regulations as follows:
Executive Order 13847, 83 FR 45321, which was signed on August 31, 2018, directs the Secretary of the Treasury to examine the life expectancy and distribution period tables in the regulations on required minimum distributions from retirement plans and determine whether they should be updated to reflect current mortality data and whether such updates should be made annually or on another periodic basis. The purpose of any such updates would be to increase the effectiveness of tax-favored retirement programs by allowing retirees to retain sufficient retirement savings in these programs for their later years.[3]
The preamble goes on to summarize the results of the change as follows:
The life expectancy tables and applicable distribution period tables in the proposed regulations reflect longer life expectancies than the tables in the existing Table to calculate required minimum distributions must use a life expectancy of 27.4 years under the existing regulations. Using the Uniform Lifetime Table set forth in the proposed regulations, this IRA owner would use a life expectancy of 29.1 years to calculate required minimum distributions. As another example, under the existing regulations, a 75-year old surviving spouse who is the employee’s sole beneficiary and uses the Single Life Table to compute required minimum distributions must use a life expectancy of 13.4 years. Under the proposed regulations, the spouse would use a life expectancy of 14.8 years. The effect of these changes is to reduce required minimum distributions, which will allow participants to retain larger amounts in their retirement plans to account for the possibility they may live longer.[4]
The proposed effective date is described as follows in the preamble:
The life expectancy tables and Uniform Lifetime Table under these proposed regulations would apply for distribution calendar years beginning on or after January 1, 2021. Thus, for example, for an individual who attains age 70½ during 2020 (so that the minimum required distribution for the distribution calendar year 2020 is due April 1, 2021), the final regulations would not apply to the minimum required distribution for the individual’s 2020 distribution calendar year (which is due April 1, 2021), but would apply to the minimum required distribution for the individual’s 2021 distribution calendar year (which is due December 31, 2021).[5]
The revised table that affects the most taxpayers is the Uniform Lifetime Table, used most often to compute required minimum distributions for the original beneficiary for IRA accounts and qualified plan accounts. The IRS describes the use of this table as follows:
The Uniform Lifetime Table in the proposed regulations sets forth joint and last survivor life expectancies for each age beginning with age 70, based on a hypothetical beneficiary. Pursuant to §1.401(a)(9)-5, Q&A-4(a), the Uniform Lifetime Table is used for determining the distribution period for lifetime distributions to an employee in situations in which the employee’s surviving spouse either is not the sole designated beneficiary or is the sole designated beneficiary but is not more than 10 years younger than the employee. As under the existing regulations, the joint and last survivor life expectancy of an employee is taken from the Joint and Last Survivor Table using a hypothetical beneficiary who is assumed to be 10 years younger than the employee.[6]
The proposed Uniform Life Table is reproduced below:[7]
| Age of Employee | Distribution Period |
|---|---|
| 70 | 29.1 |
| 71 | 28.2 |
| 72 | 27.3 |
| 73 | 26.4 |
| 74 | 25.5 |
| 75 | 24.6 |
| 76 | 23.7 |
| 77 | 22.8 |
| 78 | 21.9 |
| 79 | 21.0 |
| 80 | 20.2 |
| 81 | 19.3 |
| 82 | 18.4 |
| 83 | 17.6 |
| 84 | 16.8 |
| 85 | 16.0 |
| 86 | 15.2 |
| 87 | 14.4 |
| 88 | 13.6 |
| 89 | 12.9 |
| 90 | 12.1 |
| 91 | 11.4 |
| 92 | 10.8 |
| 93 | 10.1 |
| 94 | 9.5 |
| 95 | 8.9 |
| 96 | 8.3 |
| 97 | 7.8 |
| 98 | 7.3 |
| 99 | 6.8 |
| 100 | 6.4 |
| 101 | 5.9 |
| 102 | 5.6 |
| 103 | 5.2 |
| 104 | 4.9 |
| 105 | 4.6 |
| 106 | 4.3 |
| 107 | 4.1 |
| 108 | 3.9 |
| 109 | 3.7 |
| 110 | 3.5 |
| 111 | 3.4 |
| 112 | 3.2 |
| 113 | 3.1 |
| 114 | 3.0 |
| 115 | 2.9 |
| 116 | 2.8 |
The other tables, which are used less frequently, can be found in the text of the proposed regulations.