SECTION 401 of the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 modified the required minimum distribution (RMD) rules for designated beneficiaries who aren't surviving spouses. This modification became effective to inherited qualified contribution plans or individual retirement accounts (IRAs) beginning in 2020. The U.S. House of Representatives Ways and Means Committee Report 116-65 Part 1 provided the reasoning behind the change: Not taxing the contributed wages nor the income from this creates a tax subsidy for retirement savings that's intended to encourage individuals and families to spend less during their working years and increase their saving for retirement. Moreover, this tax subsidy for retirement savings should decrease during the retirement of the individual and the surviving spouse, except in the case of certain other beneficiaries.
There are no changes to the RMD rules in the case of a sole designated surviving spouse. Those designated beneficiaries who aren't surviving spouses, in general, will be required to distribute the plan funds within 10 years after the owner's date of death. As a result, the funds can't be stretched over the life expectancy of the beneficiary unless that individual qualifies as an eligible beneficiary. To be eligible, the individual must be at least one of the following:
1. The surviving spouse of the IRA owner,
3. Chronically ill,
4. No more than 10 years younger than the IRA owner, or
5. A child of the IRA owner who hasn't reached the age of majority.
Internal Revenue Code (IRC) [section]72(m)(7) defines a disabled person as someone who is unable to perform substantial gainful activity because of any medically determined physical or mental impairment that can be expected to either end in death or exist for a long, continued, and indefinite time. Furthermore,...