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Compliance Newsletter April 2023

Reporting Relief for 2023 IRA RMDs

The Internal Revenue Service has issued guidance to financial institutions on reporting required minimum distributions (RMDs) for 2023 for individual retirement accounts and annuities (IRAs) as a result of the SECURE 2.0 Act of 2022 (SECURE 2.0).

Background

One of the retirement savings provision changes in SECURE 2.0 is a change in the required beginning age for RMDs from 72 to age 73 starting on January 1, 2023. Under this provision, an IRA owner must take their first RMD by April 1 of the calendar year following the year in which the individual attains age 73 starting on January 1, 2023 and ending on December 31, 2032. IRA owners turning 72 in 2023 will now have a required beginning date of April 1, 2025, instead of April 1, 2024, the date that would have been required prior to SECURE 2.0 passing.

When an IRA owner has their first RMD due by April 1, the financial institution that is the trustee, custodian, or issuer of the IRA must issue a statement to the IRA owner by January 31 informing them of the due date and the amount of the RMD that is due (or offer to calculate the amount by request). Once the RMD has been distributed, the financial institution must also file a Form 5498 by May 31.

Relief

Since IRA owners attaining age 72 in 2023 will not have an RMD due for 2023, the RMD statement and corresponding Form 5498 should not be issued. Due to the short amount of time that financial institutions have had to update their systems since SECURE 2.0 was enacted on December 29, 2022, the IRS is providing reporting relief. If a financial institution incorrectly issues an RMD statement to an IRA owner turning age 72 in 2023, they can issue another statement to the owner by April 28, 2023, stating that an RMD is not due for 2023. If these circumstances are met, the IRS will not consider the first RMD statement to have been issued in error.

Disaster Relief for CA, NY, and MS

In response to severe winter storms, flooding, landslides, and mudslides that occurred in California beginning on March 9, 2023; severe winter storms and snowstorms in New York beginning on December 23, 2022 and ending on December 28, 2022; and tornados, straight-line winds, and severe storms that occurred in Mississippi on March 24 and 25, 2023, the Internal Revenue Service (IRS) extended various deadlines for impacted businesses and taxpayers in California, New York, and Mississippi. Pension Benefit Guaranty Corporation (PBGC) also offers relief for certain deadlines according to a one-time announcement published in the federal Register on July 2, 2018.

Impacted Areas

Individuals who reside or have a business anywhere within the California counties of Alpine, Amador, Butte, Calaveras, Del Norte, El Dorado, Fresno, Glenn, Humboldt, Imperial, Inyo, Kern, Kings, Lake, Los Angeles, Madera, Mariposa, Mendocino, Merced, Mono, Monterey, Napa, Nevada, Orange, Placer, Plumas, Sacramento, San Benito, San Bernardino, San Francisco, San Joaquin, San Mateo, San Luis Obispo, Santa Barbara, Santa Clara, Santa Cruz, Sierra, Sonoma, Stanislaus, Trinity, Tulare, Tuolumne, and Yuba; the New York counties of Erie, Genesee, Niagara, St. Lawrence, and Suffolk; and the Mississippi counties of Carroll, Humphreys, Monroe, and Sharkey may be eligible for extended deadline relief.

Deadline Relief

For California, certain deadlines are extended until October 16, 2023 if they fall on or after March 9, 2023 and before October 16, 2023. In New York, certain deadlines are extended until May 15, 2023 that fall on or after December 23, 2022 and before May 15, 2023. For Mississippi, certain deadlines are extended until July 31, 2023 that fall on or after March 24, 2023 and before July 31, 2023.

Below is a partial list of retirement-impact tax filing and payment deadlines that may be extended:

  • Retirement plan loan repayments under Internal Revenue Code section 72(p)(2)
  • Required minimum distributions under Internal Revenue Code section 401(a)(9)
  • The 10% additional income tax continues to not apply even if the following is missed during the relief period:
    • Substantially equal payments made over the participant’s life or joint lives of the participant and designated beneficiary
    • Deadline for using a distribution from an IRA for a first-time home purchase by the close of the 120th day after the distribution is received
  • Prior tax year contribution deadlines for retirement plans
  • Indirect rollover distribution deadlines
    • 60-day rollovers
    • Rollover of qualified loan offsets
  • Refunds as a result of
    • Excess deferrals
    • ADP/ACP non-discrimination testing
    • Eligible automatic contribution arrangement (EACA) withdrawals
    • Excess IRA contributions
  • Deadline for recontributing qualified reservist distributions
  • Form 5500 and Form 8955-SSA filing Form 5498 for IRAs
  • PBGC premium payments
  • PBGC deadlines that are based on the Form 5500 deadline
  • Single Employer Plan Termination Forms 500 and 501

Additional Resources

For any questions related to IRS deadlines and other disaster-related issues, the IRS has a toll-free number at 1-866-562-5227. For PBGC disaster-related questions, call 1-800-736-2444 ext. 4136.

The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment or tax advice. You should consult with appropriate counsel, financial professionals or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.

Insurance products and plan administrative services provided through Principal Life Insurance Company®, a member of the Principal Financial Group®, Des Moines, IA 50392.

Principal Life Insurance Company, Des Moines, Iowa 50392-0001, www.principal.com, Principal®, Principal Financial Group® and the Principal logo design are registered trademarks of Principal Financial Services, Inc., a Principal Financial Group company, in the United States and are trademarks and service marks of Principal Financial Services, Inc., in various countries around the world.

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