On December 29, 2022, Biden signed H.R.2617, the Consolidated Appropriations Act of 2023, into law. Hidden within this appropriations bill are several retirement provisions under the section named “Division T – The SECURE 2.0 Act of 2022” (PDF Page 817).
In this series, I am reviewing the major changes created by this act. This article is about “SEC. 325. ROTH PLAN DISTRIBUTION RULES” (starts on PDF Page 901).
Prior to the SECURE 2.0, anyone who had to take RMDs from their employer sponsored retirement plan, sadly, had to take RMDs from all components of the plan. This even included requiring RMDs from Roth deferrals.
Thankfully, SECURE 2.0 eliminates this requirement starting in 2024.
For taxable years beginning after December 31, 2023, the mandatory distribution rules do not apply to qualified plan Roth balances. This seems to also include individuals who have previously had to take Roth RMDs from their employer plan.
It appears that this legislation applies to “any designated Roth account.” This appears to include essentially every qualified employer retirement plan such as 401(k) plans, 403(b) plans, and Thrift Savings Plans.
The amendment is in Section 402A(d) and reads:
(5) MANDATORY DISTRIBUTION RULES NOT TO APPLY BEFORE DEATH.—Notwithstanding sections 403(b)(10) and 457(d)(2), the following provisions shall not apply to any designated Roth account:
(A) Section 401(a)(9)(A).
(B) The incidental death benefit requirements of section 401(a).
This update only amends the Roth-side of employer retirement plans to behave more like Roth IRAs prior to death. It is worth noting that inherited Roth RMDs are still a requirement for both employer plans and IRAs.
Photo by Jill Wellington from Pexels. Image has been cropped.