The Internal Revenue Service has published proposed regulations that include new life expectancy tables for minimum required distributions under I.R.C. § 401(a)(9), which applies to both qualified retirement plans and individual retirement accounts. “Updated Life Expectancy and Distribution Period Tables Used for Purposes of Determining Minimum Required Distributions,” REG-132210-18, 84 F.R. 60812 (11/8/2019).
The proposed new tables generally provide for longer life expectancies, which means that smaller distributions can be made. For example, a 70- year old IRA owner who uses the Uniform Lifetime Table to calculate required minimum distributions must use a life expectancy of 27.4 years under the existing regulations. Using the Uniform Lifetime Table in the proposed regulations, the IRA owner would use a life expectancy of 29.1 years to calculate required minimum distributions. So the required distribution would be calculated by dividing by 29.1 (3.436% of the retirement fund) instead of 27.4 (3.650%), which is a reduction of about 5.85%.
As another example, a 75-year old surviving spouse who is the employee’s sole beneficiary and uses the Single Life Table to compute required minimum distributions must use a life expectancy of 13.4 years under current regulations. Under the proposed regulations, the spouse would use a life expectancy of 14.8 years, which will allow a distribution which is about 9.5% smaller.
The Required Minimum Distribution calculator in Webcalculators has already been updated to include the new life expectancy tables as an option for projecting future distributions. Although the calculator does not show a side-by-side comparison between distributions under the current and proposed regulations, it is fairly easy to generate two reports under the two different regulations and see the differences in the two reports.