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ARA Comments on RMD Life Expectancy and Distribution Tables

On Oct. 5, 2018, the American Retirement Association (ARA) filed a comment letter with Carol Weiser, Acting Benefits Tax Counsel at the Treasury Department, with recommendations on the implementation of updates to life expectancy and distribution period tables for purposes of the required minimum distribution (RMD) rules.

The ARA expresses its support for such an update of the life expectancy and distribution period tables, and notes that the current regulations in effect for this purpose were published in final form in 2002. The ARA supports this change, which it says “should result in greater benefit security for participants, as less would be required to be distributed each year than under the 2002 final regulations.”

The ARA made the following recommendations for updating the tables:

  1. Any change to the life expectancy and distribution tables be finalized at least six months before the beginning of the calendar year for which they are effective, in order to allow time to revise software and administrative procedures to calculate new amounts. We anticipate that software updates across many financial institutions supporting the retirement industry will be necessary. As a result, the ARA recommends that no changes be made that are effective for the 2019 calendar year, and that if any change is made for the 2020 calendar year, that regulations or other guidance be finalized by July 1, 2019.

  2. No changes to the life expectancy and distribution tables be made unless they are significant enough to justify the costs and complexities of transitioning to new mortality tables. The ARA suggests a reasonable threshold be used, such that a change would only be justifiable if the uniform life expectancy table at age 70 would be changed by at least one year.

  3. In the future, after the update is issued in accordance with President Trump’s Aug. 31, 2018 Executive Order, the IRS review the tables and determine whether another change is justifiable every five years, rather than updates being done on an annual basis.

Finally, regarding the selection of the mortality table to be used in the updated regulations or guidance, the ARA writes that it reserves the right to submit an additional comment at a later date.