Congressional Changes to Retirement Accounts for 2023

On December 23, 2022 the Secure 2.0 Act of 2022 was signed in to law as part of the Consolidated Appropriations Act, 2023.  While this may have been a uneventful moment for most Americans it could potentially have an impact on your Retirement Plan Account.  Here are some important features that take place in 2023 and beyond for you to consider:

  • One key provision of the Secure 2.0 act was to increase the required minimum distribution (RMD) age to 73 as of January 1st, 2023.  However, if you turned 72 in 2022, you had to take your first RMD by April 1st, 2023.
  • What is an RMD you might ask?  Per the IRS – Required Minimum Distributions (RMDs) are minimum amounts that IRA and retirement plan account owners generally must withdraw annually starting with the year they reach age 72 (now 73 if you reach age 72 after Dec. 31, 2022). 
  • What kind of plans require an rmd?  The RMD rules apply to all employer sponsored retirement plans, including profit-sharing plans, 401(k) plans, 403(b) plans, and 457(b) plans. The RMD rules also apply to traditional IRAs and IRA-based plans such as SEPs, SARSEPs, and SIMPLE IRAs.

The RMD rules do not apply to Roth IRAs while the owner is alive. However, RMD rules do apply to the beneficiaries of Roth 401(k) accounts.

  • Retirement plan participants and IRA owners, including owners of SEP IRAs and SIMPLE IRAs, are responsible for taking the correct amount of RMDs on time, every year from their accounts, and they may face stiff penalties for failure to take RMDs.

If you have a retirement plan account that may meet the description of one described above, please reach out to your financial advisor or the manager of your plan to make sure you are compliant with the new rules.  If you fail to take your required distribution in the first year you are required, you can face penalties imposed by the IRS.  You have until April of the year after you are eligible to start taking your distribution.

Thank you,

Austin Fugitt, CPA