New Life Expectancy Tables for RMDs after 2021

The IRS has updated the life expectancy tables used to figure required minimum distributions beginning after December 31, 2021 (T.D. 9930). The new tables reflect changes in mortality rates; people are living longer. As a result, individuals will be required to take smaller RMDs. For example, an IRA owner, age 72 in 2022, will use a life expectancy of 27.4 years from the updated Uniform Lifetime Table to figure the RMD for 2022 as compared with the former life expectancy of 25.6 years. If the account balance as of December 31, 2021, is $100,000, it means the RMD for 2022 is $3,650; it would have been $3,906 under the life expectancy tables in use before 2022. Similarly, a 75-year old surviving spouse who is an employee’s sole beneficiary has a life expectancy of 14.8 years under the updated Single Life Table as compared with 13.4 years under the pre-2022 table.

There is a transition rule for an employee dying before January 1, 2022, in three situations. Under this rule, there is a one-time reset for the relevant life expectancy using the new Single Life Table. These situations are:

1. The employee died with a non-spousal eligible designated beneficiary (the distribution period is determined based on the remaining life expectancy of the eligible designated beneficiary for the calendar year following the calendar year of the employee’s death).
2. The employee died after the required beginning date without a designated beneficiary (the distribution period is determined based on the remaining life expectancy of the employee for the year of the employee’s death).
3. The employee, who is younger than the designated beneficiary, died after the required beginning date (the distribution period is determined based on the remaining life expectancy of the employee for the year of the employee’s death).

Individuals taking substantially equal periodic payments will have to make adjustments to them after 2021, reflecting the new life expectancy tables. The IRS will provide new guidance for this purpose.

The life expectancy tables are not adjusted on a regular basis, but the IRS expects to revise them in 10 years using mortality rates available at that time.

Note: Congress is considering legislation—Securing a Strong Retirement Act—to change some RMD rules, including eliminating any required distribution if the account balance does not exceed $100,000 and raising the RMD age to 75. This legislation likely will not receive serious consideration until after 2020.