Bloomberg Tax
Oct. 20, 2022, 8:45 AMUpdated: Oct. 20, 2022, 12:37 PM

IRS Raises More Questions on New Retirement Account Provisions (1)

Kelly Phillips Erb
Kelly Phillips Erb

In the movies, retirement always looks so relaxing. It’s all balmy weather, free time, lunch hour cocktails, and cruises.

But here’s the part that they don’t tell you: When it comes to figuring out retirement accounts, it’s not so easy. There are lots (and lots) of rules that govern contributions and distributions, and running afoul of those rules can result in a headache.

Congress claimed they wanted to make saving for retirement easier by passing the SECURE Act of 2019. But, as taxpayers and tax professionals are learning, the SECURE Act did not simplify things. A set of proposed regulations earlier this year confounded many—and while a notice issued this month offers some relief, other questions remain unanswered.


To make sense of the proposed regulations and the notice, it’s helpful to understand the SECURE Act.

Congress loves acronyms, and the SECURE Act bears that out: It stands for Setting Every Community Up for Retirement Enhancement Act. It initially passed the House in July but ran into some pushback in the Senate. It was finally absorbed into the 2020 appropriations bill and signed into law Dec. 20, 2019.

The idea behind the SECURE Act was to make it easier to participate in retirement plans by expanding opportunities to save and allowing workers to keep money in the plans longer. Here are a few of those changes with the section numbers of Division O of the law, which you can find here, noted in parentheses:

  • The prohibition on contributions to a traditional IRA after age 70½ is repealed (Section 107). You can now make contributions indefinitely.
  • Businesses may now enroll long-term, part-time workers in 401(k) plans (Section 112).
  • Withdrawals from retirement plans for any “qualified birth or adoption distributions” up to $5,000 are penalty-free (Section 113).
  • The age at which retirement plan participants need to take required minimum distributions, or RMDs, was pushed from 70½ to 72 (Section 114).
  • 529 accounts may be used to repay qualified student loans of up to $10,000, tax-free—this may not be the case in individual states (Section 302). Additionally, the term “qualified higher education expense” was expanded to include those funds used for registered and certified apprenticeship programs.
  • Stretch IRAs are restricted to eligible designated beneficiaries (Section 401). That means most non-spousal beneficiaries must empty an inherited IRA by the end of the 10th year after the original account owner’s death—this being tax, some exceptions apply.

To assist taxpayers with some of these rules, the IRS created a webpage that answers some frequently asked questions. However, as of this writing, the most recent update predates Notice 2022-53 (keep reading for more on the notice).

Senior Citizens take part in the Kelvinside weekly tea dance, Feb. 22, 2005, Glasgow, Scotland.
Photographer: Christopher Furlong via Getty Images

Questions About the New Law

Most of the changes under the new law were slated to take effect in 2020. There was just one problem: There was no guidance on those changes. That meant many tax professionals were forced to draw their own conclusions about how best to interpret the new law.

Many believed, for example, that the new 10-year rule for RMDs would work like the old five-year rule. Under that rule, you could wait until the last year to take your distribution as a lump sum, and it would still qualify.

The proposed regulations, issued in February 2022, took a different tack. They suggested the clock began ticking for taking out RMDs starting the year after the participant’s death if the participant died on or after their own required beginning date. Further, the proposed regulations referenced Section 401(a)(9)(B)(i) of the Tax Code that says if the employee dies after distributions have begun, the employee’s remaining interest must be distributed “at least as rapidly” as the distribution method used by the employee as of the date of the employee’s death.

The specifics get complicated quickly—and are beyond the scope of this article. But generally, the result of that interpretation is that beneficiaries subject to the new law and not otherwise excluded would need to begin pulling out RMDs in the year after death, and not as a lump sum. That means affected beneficiaries should have taken RMDs in 2021 and 2022, as applicable. Those that did not were technically not in compliance and may owe a whopping 50% excise tax under Section 4974.

Public Reaction

That didn’t seem fair, and commenters let the IRS know—that’s the whole point of the public comment period. You can read a sampling of those comments here:

Notice 2022-53

As a result, this month, the IRS issued Notice 2022-53, which makes clear that the IRS intends to issue final regulations related to RMDs under Section 401(a)(9) “that will apply no earlier than the 2023 distribution calendar year” and provides guidance related to certain provisions that apply for 2021 and 2022.

Specifically, the notice clarifies that to the extent a taxpayer did not take a specified RMD related to this rule, the IRS will not impose the Section 4974 penalty. And, if a taxpayer has already paid the excise tax for a missed related RMD, the taxpayer can request a refund.


The timing is important. The relief applies to those beneficiaries under a defined contribution plan or IRA where the employee or IRA owner died in 2020 or 2021 and on or after the employee’s or IRA owner’s required beginning date. In other words, it applies to any distribution under the interpretation included in the proposed regulations that would have been required to be made pursuant to Section 401(a)(9) in 2021 or 2022.

The relief doesn’t apply to certain beneficiaries, like spouses, who were not subject to the 10-year rule. It also doesn’t apply to taxpayers who were otherwise required to take their RMDs in 2021 or 2022.

Room for Interpretation?

As taxpayers and practitioners sort through the implications of the proposed regulations and notice, it’s not clear whether the IRS will reconsider its stance on the 10-year rule. An IRS spokesperson confirmed that the agency is considering all comments received during the comment period. And at the American Bar Association’s Fall Tax Meeting in Dallas last week, IRS officials said that the agency set a tentative deadline for the end of 2023 to complete most of its regulatory work under the SECURE Act (link is for subscribers only).


There’s a possibility for more change. Earlier this year, the House passed an additional retirement savings bill, Securing a Strong Retirement Act of 2022, touted as “SECURE 2.0.” The House version of the bill would automatically enroll employees into 401(k) or 403(b) plans, though you would be able to opt out. It also would boost catch-up contribution limits for employees who are ages 62 to 64. And notably, it would delay RMDs to age 75 by 2032. That bill was sent to the Senate and subsequently referred to the Committee on Finance, where it currently sits.

There is no specific language in the bill that would add clarity to the 10-year rule. However, there has been some suggestion in the tax and financial planning communities that a final version of the bill might also address these issues.

What Now?

If this all feels a bit messy, you’re not wrong. Retirement account rules can be complicated, and questions often pop up when interpreting new laws. But when you put those two things together? It’s impossible not to feel somewhat uncertain.

That shouldn’t, however, translate into inaction. It’s essential for taxpayers to feel comfortable working with their advisers. Don’t be afraid to ask questions about next steps and whether these changes impact retirement, tax, and investment strategies. And when the future isn’t quite clear, don’t assume that it won’t affect you. It’s worth checking in from time to time to see how the law—and how it’s interpreted—evolves.

This is a regular column from Kelly Phillips Erb, the Taxgirl. Erb offers commentary on the latest in tax news, tax law, and tax policy. Look for Erb’s column every week from Bloomberg Tax and follow her on Twitter at @taxgirl.

(Added expanded definition of qualified higher education expenses for 529 plans.)

To contact the reporter on this story: Kelly Phillips Erb in Washington at

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