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Bonnie Jensen briefs Edgewater trustees on new RMD age and rollover rules
Summary
Presenter Bonnie Jensen told Edgewater trustees the federal required minimum distribution age is now 73 (rising to 75 in 2033), explained trustee duties to locate retirees and make RMDs, and reviewed rollover eligibility and the IRS special tax notice trustees must provide.
Bonnie Jensen, a presenter at the Edgewater meeting, told trustees that federal law now requires required minimum distributions (RMDs) at age 73 and that the RMD age is scheduled to rise to 75 in 2033. She said trustees should search annually for retirees approaching RMD age and ensure distributions are made or documented.
Why it matters: RMDs are taxable events and plans are responsible for taking reasonable steps to locate participants and effect distributions. Jensen said trustees should add RMD notices to plan communications and involve the actuary in calculation of each participant’s required amount.
Jensen summarized the federal history and mechanics of the rule: ‘‘The internal revenue code requires distributions to be made at age 73,’’ she said, adding that the calculation is ‘‘based on an actuarial lifetime table.’’ She described penalties for missed distributions, noting the SECURE Act reduced the historic 50% excise to 25% and that a good‑faith exception can reduce it further to about 10% in some cases.
Trustees asked how the payout percentage is determined. A committee member asked, ‘‘They're requiring you to take the money at 73, but do they require a percentage?’’ Jensen responded: ‘‘Yes. It’s an actuarial calculation...it's based on an actuarial lifetime table’’ and that the precise percentage varies by participant circumstances.
Jensen also reviewed rollover rules for lump‑sum payouts and the IRS special tax notice trustees must provide to anyone receiving a lump sum: plans must give recipients 30 days to review the notice before making a distribution. She emphasized that RMDs themselves are not rollover‑eligible and recommended plans ensure rollover paperwork and the special tax notice are in current plan documents.
The presentation included administrative best practices: annual automated searches for retirees reaching RMD age, clear notices in the summary plan description, and bringing the actuary into calculations. Trustees raised clarifying questions but took no formal action. The meeting then returned to other agenda items.
