SECURE 2.0 Doesn't Require That Defined Benefit Plans Delay Payments Until Age 73

Many plans can keep benefit commencement at 70 1/2, but sponsors still need to adopt certain SECURE amendments before Dec. 31.

 SECURE Acts 1.0 and 2.0 which made several amendments to the way qualified plans operate, increased the age at which participants must begin receiving required minimum distributions (RMDs). Does this mean that plan sponsors’ defined benefit plans must now delay mandatory benefit commencement until age 73 or later?

For many defined benefit plans, the answer is no. While SECURE 1.0 and SECURE 2.0 increased the statutory RMD ages under the Internal Revenue Code, those changes did not automatically alter plan provisions that independently require benefit commencement at age 70 1/2. As a result, many defined benefit plans may continue requiring distributions at age 70 1/2, notwithstanding the changes to the federal RMD rules.

RMD Rules Establish a Maximum, Not Necessarily a Plan’s Distribution Age

Internal Revenue Code Section 401(a)(9) establishes the latest date by which retirement benefits generally must commence. Historically, that age was 70 1/2. SECURE 1.0 increased the applicable age to 72. SECURE 2.0 further increased the age to 73, with future increases applicable to certain individuals.

One question raised by the legislation is whether plans may continue requiring participants to begin receiving benefits before the new RMD ages. Again, the RMD rules generally establish the latest permissible commencement date under the Internal Revenue Code. A retirement plan may require benefits to commence earlier.

Determining when benefits must begin requires a review of the plan document itself, not merely the current statutory RMD age.

The Plan Document Remains Critical

Many defined benefit plans contain their own definition of "required beginning date" that requires a participant's benefit to commence by April 1 of the calendar year following the year in which the participant reaches age 70 1/2.

Where a plan contains such a provision and does not simply incorporate the applicable Internal Revenue Code section by reference, the plan's mandatory commencement rules may continue to apply, notwithstanding the statutory changes enacted by SECURE 1.0 and SECURE 2.0.

In this respect, the plan's distribution provisions may be more restrictive than the federal RMD rules by requiring benefits to commence before the statutory deadline.

IRS Guidance Confirms This Approach

The preamble to the Treasury Department's final RMD regulations issued in 2024 addresses this issue directly. The Treasury Department and IRS noted that a plan may require benefits to commence by April 1 of the calendar year following the year a participant reaches age 70 1/2, even though the statutory RMD ages under the Internal Revenue Code have increased.

Accordingly, the increase in the statutory RMD ages does not prevent a defined benefit plan from continuing to require distributions at age 70 1/2 where the plan document so provides.

Sponsors Still Need to Adopt Technical SECURE Amendments

The fact that a plan may continue requiring distributions at age 70 1/2 does not eliminate the need for SECURE-related plan amendments.

SECURE 1.0 and SECURE 2.0 contain a number of required qualification changes affecting retirement plans, including amendments to provisions addressing the statutory RMD rules under the Internal Revenue Code. These amendments generally must be adopted by the applicable remedial amendment deadline, currently Dec. 31, for many qualified retirement plans.

These amendments are generally technical in nature. Updating plan language to reflect the statutory RMD ages under the Internal Revenue Code does not necessarily require a plan sponsor to abandon a separate plan provision that independently requires distributions to commence at age 70 1/2.

What Should Plan Sponsors Do?

Plan sponsors should not assume that SECURE 1.0 and SECURE 2.0 automatically changed their plan's required beginning date. Instead, sponsors should:

• • Review the plan's definition of "required beginning date" and related distribution provisions.
  • Determine whether the plan independently requires benefit commencement at age 70 1/2 or another age.
  • Confirm that all required SECURE 1.0 and SECURE 2.0 amendments are adopted before the applicable deadline.

 SECURE 2.0 increased the statutory RMD ages under the Internal Revenue Code, but it did not automatically change every defined benefit plan's required beginning date. A plan that independently requires benefit commencement at age 70 1/2 may generally continue operating under that provision. At the same time, plan sponsors should ensure that all required SECURE amendments are timely adopted. For many plans, those amendments will constitute technical plan document updates rather than operational changes.

Please contact Anne Harvey, Michael Williams or any member of Phelps' employee benefits and executive compensation or labor and employment teams if you need guidance.