IRS Issues Notice 2024-35 to Provide Relief for Certain RMDs in 2024

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IRS Issues Notice 2024-35 to Provide Relief for Certain RMDs in 2024

On April 16, 2024, the Internal Revenue Service (IRS) issued Notice 2024-35, which provides relief regarding certain Required Minimum Distributions (RMDs) for 2024. The relief is applicable to certain RMDs under Internal Revenue Code section 401(a)(9) in 2021, 2022 and 2023, and is also being extended to certain RMDs in 2024.

Specifically, the Notice provides that if certain requirements are met, a plan will not fail to be qualified for failing to make a specified RMD in 2024, and a taxpayer will not be assessed an excise tax for failing to take the RMD. The relief provided in Notice 2024-35 relates to the required distribution changes under the SECURE Act of 2019. It extends prior relief provided in Notice 2023-54 and Notice 2022-53 for another year.

Essentially, the Notice defines a “specified RMD” identically as previously defined in Notice 2023-54 as follows:

“any distribution that, under the interpretation included in the proposed regulations, would be required to be made pursuant to Section 401(a)(9) in 2024 under a defined contribution plan or IRA that is subject to the rules of Section 401(a)(9)(H) for the year in which the employee (or designated beneficiary) died if that payment would be required to be made to:

  • a designated beneficiary of an employee under the plan (or IRA owner) if: (1) the employee (or IRA owner) died in 2020, 2021, 2022, or 2023, and on or after the employee’s (or IRA owner’s) required beginning date, and (2) the designated beneficiary is not using the lifetime or life expectancy payments exception under Section 401(a)(9)(B)(iii); or
  • a beneficiary of an eligible designated beneficiary (including a designated beneficiary who is treated as an eligible designated beneficiary pursuant to Section 401(b)(5) of the SECURE Act) if: [1] the eligible designated beneficiary died in 2020, 2021, 2022, or 2023, and [2] that eligible designated beneficiary was using the lifetime or life expectancy payments exception under Section 401(a)(9)(B)(iii) of the Code.”

In addition, the notice indicated that the Department of the Treasury and the Internal Revenue Service (IRS) intend to issue final RMD regulations that would apply for purposes of determining RMDs for calendar years beginning on or after January 1, 2025.

The Notice is available here.

American Academy of Actuaries Publishes Issue Brief on ‘Surplus’ Considerations for Public Pension Plans

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American Academy of Actuaries Publishes Issue Brief on ‘Surplus’ Considerations for Public Pension Plans

On April 11, 2024, the American Academy of Actuaries (AAA) published its issue brief, ‘Surplus’ Considerations for Public Pension Plans. The brief was authored by the AAA’s Public Plans Committee and presents the Committee’s perspective regarding a public pension plan’s “surplus” and considerations for plans that are 100% funded or approaching a full funding level in the future. 

The key highlights include:

  • The brief suggests public pension plans use caution when using the term “surplus” or other similar terms such as “overfunded” to define a plan with a funded ratio over 100%;
  • A “surplus” management strategy should be developed and integrated into the plan’s funding policy; and
  • A “surplus” management strategy may include various elements that may be intended to preserve a plan’s current “surplus” and/or decrease the risk of future funded status and contribution volatility, such as benefit improvements, contribution adjustments and risk reduction strategies.

The brief concludes, “Historically, “surplus” often has been used to enhance benefits and reduce contributions. Funding policies should start by considering using “surplus” to manage or reduce risks to the plan. Balancing alternative uses of “surplus” may result in more measured contribution reductions, a more thorough analysis of the risks related to permanent benefit enhancements, and, ultimately, more stable funding of public pension plans.”

Among other members, the AAA’s Public Plans Committee includes Judith Kermans, President, CEO and Senior Consultant at GRS as well as Brian Murphy, a retired Senior Consultant and past President of GRS. 

The brief is available here.

CRS Releases Report on Investment Issues for Pensions and Individual Retirement Accounts (IRAs)

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CRS Releases Report on Investment Issues for Pensions and Individual Retirement Accounts (IRAs)

On April 3, 2024, the Congressional Research Service (CRS) released its report, Pensions and Individual Retirement Accounts (IRAs): Investment Issues. The report summarizes pension investment issues for state and local pensions, federal pensions, private sector pension plans, and IRAs. For each type of pension or retirement accounts, the report explains relevant federal authorities, federal oversight and administrative issues.

​In addition, the report identifies selected pension investment issues, which have been involved in recent legislative or regulatory activity. The intent is to provide information to help Congress understand existing legislative proposals and develop new legislative proposals. The report provides background information on pension investment issues and presents differences across sectors and types of plans. The report states, “Understanding the relevant authorities and administration of different types of pension plans and retirement accounts is crucial to untangling policy proposals to address pension investment issues.”

As an example, the report indicates that state and local pension plans are generally governed by state laws, contract law and/or state constitutions. They are also exempt from many (but not all) requirements under the Employee Retirement Income Security Act of 1974 (ERISA), which covers most private sector pension plans. According to the report, lawmakers have been considering policy proposals to address pension investment issues for state and local pensions related to environmental, social, and governance (ESG) investing, alternative investments, geopolitical considerations, and diverse asset managers.

The report is available here.

MissionSquare Studies Views of Younger Public Service Employees by Occupation

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MissionSquare Studies Views of Younger Public Service Employees by Occupation

Recently, the Center for State and Local Government Excellence at ICMA-RC or SLGE) released its issue brief, 35 and Under in the Public Sector: Comparisons by Industry. The Institute researched the views of public sector employees under age 35 by occupation. It studied employees in various occupations including: education, health care, public safety, among others. The brief compared the views of employees related to finances, employer benefits, morale, job satisfaction and long-term career plans.

According to the brief, education workers expressed the highest levels of financial concerns and public safety workers were the most likely to make their jobs a career.

Some of the key findings include:  

  • Of the respondents, only 26% of K-12 education workers felt they were financially secure as compared to 49% of public safety workers;
  • About 21% of the respondents with occupations in public works, utilities and transportation were very stressed in the last six months with those working in K-12 education feeling the highest level of stress at 42%; and
  • About 58% of public safety workers indicated they were interested in remaining in the public sector until they retire; whereas, only 32% working in public works, utilities, and transportation occupations were likely to spend their entire career in public service.

According to the Institute, “Millennials and GenZ education workers report the highest levels of stress and financial concern, while higher salaries were the top priority across all professions when employees are considering a job change.” 

Further information is available here.