TSP

On May 21, 2021, it was 50 years since the late Marvin Gaye released the song “What’s Going On?” in the album of the same name. The question, “What’s Going On?” is still pertinent for many reasons, not the least of which deal with retirement, specifically Individual Retirement Arrangements (IRAs) and the Thrift Savings Plan (TSP).

John Grobe

On March 25, 2021, in the newly revised Publication 590B, Distributions from Individual Retirement Arrangements, guidance given by the IRS ran counter to how the SECURE Act had been interpreted and, according to some, counter to the clear language of the Statute.

From the time of the enactment of the SECURE Act, “other beneficiaries” of IRAs inherited from owners who died in 2020 or later have not been required to take required minimum distributions (RMDs) but have been required to totally empty out their inherited IRA by the tenth anniversary of the original owner’s death.

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Other beneficiaries are also called “non-eligible designated beneficiaries” and consist of, with few exceptions, non-spousal beneficiaries. For example, children and grandchildren are generally considered other beneficiaries.

Well, on pages 11 and 12 of the revised publication 590B (which, by the way, is 65 pages long) it states that other beneficiaries must use the single life expectancy table to determine the distributions that they are required to take.

It goes on to say that the IRA must be emptied by the tenth anniversary of the original owner’s death. This implies that other beneficiaries must both take RMDs and close out the account within ten years. But wait, IRS Publications (unlike published rules and regulations) are not considered to be official guidance.

Are RMDs required or not in IRAs that have been inherited by other beneficiaries? We’re waiting for the IRS to clarify this.

Hopefully, the IRS will clarify that rule before the end of the year so that those beneficiaries can either take, or not take, their RMDS.

How should we react to conflicting advice from government agencies? Marvin Gaye has a suggestion for us there too. “Oh, make me wanna holler and throw up both my hands.”

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