7.3 Post-RBD Death Rules and the 2024 Treasury Final Regulations (Annual RMDs in Years 1–9)

The Pre-RBD vs. Post-RBD Statutory Watershed

A central principle of retirement plan taxation is the critical statutory distinction between an account owner who dies before their Required Beginning Date (RBD) and one who dies on or after their RBD. Codified in Internal Revenue Code Section 401(a)(9)(B), this distinction dictates whether distributions are deemed to have officially commenced prior to death:

• Death Before RBD (IRC § 401(a)(9)(B)(ii)): Distributions have not legally commenced during the owner's lifetime. The beneficiary is governed by statutory default payout periods (the 10-year rule for non-EDBs, the life expectancy stretch for EDBs, or the 5-year rule for non-designated beneficiaries) without an overarching requirement to maintain an existing distribution pace.
• Death On or After RBD (IRC § 401(a)(9)(B)(i)): Distributions have formally commenced under the tax law. The statutory "at-least-as-rapidly" (ALAR) rule is triggered, mandating that the remaining balance must be distributed at least as rapidly as under the distribution method being used by the account owner as of their date of death.

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The SECURE Act Ambiguity and the Industry Debate

When Congress enacted Section 401 of the SECURE Act in 2019, creating the 10-year payout rule under IRC Section 401(a)(9)(H), the statutory text stated that the account must be distributed within 10 years after the death of the employee, using language identical to the longstanding 5-year rule under IRC Section 401(a)(9)(B)(ii).

Because the 5-year rule has never required annual distributions in years 1 through 4 (allowing a beneficiary to take nothing until December 31 of Year 5), financial institutions, IRA custodians, tax attorneys, and financial planners almost universally interpreted the 10-year rule in the exact same manner. The prevailing consensus was that a non-EDB inheriting an IRA had zero annual distribution mandates in years 1 through 9, retaining complete discretion to withdraw funds at any time as long as the account reached a zero balance by December 31 of Year 10.

The Treasury Bombshell: Proposed Regulations (February 2022)

In February 2022, the Department of the Treasury and the IRS issued proposed regulations that stunned the retirement industry. The IRS asserted that Congress enacted Section 401(a)(9)(H) without repealing or overriding the statutory "at-least-as-rapidly" requirement of Section 401(a)(9)(B)(i). Consequently, the IRS announced that both rules must apply simultaneously when an owner dies on or after their RBD:

1. The 10-year rule caps the maximum distribution window at 10 calendar years; and
2. The at-least-as-rapidly rule mandates ongoing annual distributions during that 10-year window.

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IRS Transition Relief: Notices 2022-53, 2023-54, and 2024-35

Because millions of taxpayers and financial institutions had operated under the assumption that no annual RMDs were required in 2021 or 2022, the proposed regulations threatened hundreds of thousands of beneficiaries with catastrophic excise taxes under IRC Section 4974 (then 50% of the shortfall).

In response to intense industry feedback, the IRS issued a series of administrative transition notices granting blanket excise tax relief:

• Notice 2022-53: Waived the IRC § 4974 excise tax for any beneficiary who failed to take a required annual distribution in 2021 or 2022 under the 10-year rule for an owner who died post-RBD in 2020 or 2021.
• Notice 2023-54: Extended the penalty waiver to cover missed annual distributions for calendar year 2023.
• Notice 2024-35: Further extended the relief through calendar year 2024, confirming that taxpayers who did not take annual distributions in 2024 from inherited IRAs subject to the post-RBD 10-year rule would not be penalized.

Crucially, these notices provided that beneficiaries who skipped annual distributions during 2021–2024 are not required to take cumulative "catch-up" or "make-up" distributions for the waived years. However, the waiver period has formally concluded.

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The July 2024 Final Treasury Regulations (TD 10001)

On July 19, 2024, the Department of the Treasury released its long-awaited Final Regulations on Required Minimum Distributions (Treasury Decision 10001), codified primarily in Treasury Regulation Section 1.401(a)(9)-5. The final regulations permanently codified the IRS interpretation, effective for distribution calendar years beginning on or after January 1, 2025.

The Definitive Post-RBD Rule (Treas. Reg. § 1.401(a)(9)-5(d))

Under the 2024 Final Regulations, if an account owner dies on or after their Required Beginning Date, a Non-Eligible Designated Beneficiary subject to the 10-year rule must satisfy a dual statutory mandate:

1. Annual RMDs in Years 1 Through 9: The beneficiary must calculate and distribute an annual Required Minimum Distribution in calendar years 1 through 9 following the year of the owner's death, using the Single Life Expectancy Table (Table I);
2. Terminal Cleanout in Year 10: The entire remaining balance of the inherited IRA must be completely liquidated on or before December 31 of the 10th calendar year following the calendar year of the owner's death.

Failure to take an annual RMD in Year 1 through 9 incurs the Section 4974 excise tax (25%, reducible to 10% under SECURE 2.0 upon prompt correction).

Contrast: Owner Dies BEFORE Required Beginning Date

If the account owner dies prior to their Required Beginning Date, the at-least-as-rapidly rule of IRC § 401(a)(9)(B)(i) is completely inapplicable. Under Treasury Regulation Section 1.401(a)(9)-3(c):

• A Non-EDB is not required to withdraw a single dollar in years 1 through 9;
• The beneficiary retains total discretion to take zero distributions, partial distributions, or irregular withdrawals during the 10-year window;
• The sole statutory requirement is that the entire account ledger must reach $0.00 on or before December 31 of the 10th calendar year following the year of death.

Critical CISP Rule: Roth IRAs Are ALWAYS Pre-RBD Deaths

A vital technical nuance frequently examined on the CISP test involves Roth IRAs. Under IRC Section 408A(c)(5), original Roth IRA owners are completely exempt from lifetime RMDs and have no Required Beginning Date. Consequently, under Treasury Regulation Section 1.408A-6, A-14, an original Roth IRA owner is statutorily deemed to have died BEFORE their Required Beginning Date in all cases, regardless of whether they died at age 25, 75, or 105.

Therefore, a non-EDB inheriting a Roth IRA is never subject to annual RMDs in years 1 through 9. The beneficiary can allow the entire Roth IRA balance to compound 100% tax-free for the full 10-year term, distributing the entire account on December 31 of Year 10 completely tax-free (assuming the 5-year Roth holding period was met).

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Year-of-Death RMD Mandate

When an IRA owner dies on or after their Required Beginning Date, a critical administrative question arises: Did the deceased owner satisfy their RMD for the calendar year of death prior to passing away?

Pursuant to Treasury Regulation Section 1.401(a)(9)-5(c), the RMD for the calendar year of death belongs to the deceased owner but must be satisfied. If the owner died without having fully distributed their RMD for that year:

• The unpaid portion of the owner's RMD cannot be waived or rolled over;
• The beneficiary must distribute the unpaid RMD amount on or before December 31 of the calendar year of the owner's death;
• If it is missed, Treas. Reg. § 54.4974-1(g)(3) automatically waives the excise tax when the beneficiary takes the corrective distribution by the due date (with extensions) of the beneficiary's tax return for that year, or by December 31 of the following year if later;
• The distribution is calculated using the deceased owner's attained age and the Uniform Lifetime Table (or Table II if young spouse exception applied), applied against the prior year December 31 FMV;
• The distribution is reported on Form 1099-R under the beneficiary's name and Social Security Number using Code 4 (Death), making the distribution taxable income to the beneficiary, not the decedent's final Form 1040.

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Calculation Mechanics: Annual RMDs in Years 1–9

For a Non-EDB inheriting an IRA from an owner who died on or after their RBD, the annual RMD calculation during the 10-year window follows the non-recalculation single life method:

1. Year 1 (Calendar Year Following Death): The beneficiary looks up their attained age in Year 1 in the Single Life Expectancy Table (Table I) to determine the initial divisor. The Year 1 RMD equals the December 31 fair market value of the inherited IRA in the year of death divided by this Table I factor.
2. Years 2 Through 9: For each subsequent year, the beneficiary subtracts 1.0 from the prior year's divisor. The newly reduced divisor is divided into the prior year December 31 FMV.
3. Year 10: The entire remaining ledger balance (principal plus accumulated earnings) must be fully distributed on or before December 31 of Year 10.

Exception for Older Beneficiaries: Under Treasury Regulation § 1.401(a)(9)-5(d)(1)(ii), the applicable denominator is the greater of the beneficiary's and the owner's remaining life expectancy. So if the deceased owner was younger than the beneficiary (e.g., a younger sibling died leaving an IRA to an older sibling), the distribution divisor is based on the deceased owner's remaining single life expectancy (the "ghost life expectancy"), determined in the year of death from Table I and reduced by 1.0 each subsequent year, if that produces a longer distribution period than the beneficiary's own life expectancy.

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Summary: RMD Obligations Under 10-Year Rule by Owner RBD Status

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Bank Custodial Systems & Administrative Compliance Procedures

To ensure institutional compliance with the 2024 Final Regulations, bank custodial platforms must integrate rigorous operational safeguards:

1. Dual-Track Inherited IRA Product Coding

Custodial recordkeeping engines cannot treat all inherited IRAs identically. The core platform must capture the deceased owner's exact date of birth and date of death to classify the account into one of two operational tracks:

• Track A (Pre-RBD / Roth): The system disables automated annual RMD calculations for years 1–9. The system generates an annual informational notice reminding the beneficiary of the terminal December 31 Year 10 liquidation deadline.
• Track B (Post-RBD Traditional): The system verifies satisfaction of the year-of-death RMD, captures the beneficiary's date of birth, calculates the mandatory annual Table I divisor for Year 1, applies the annual 1.0 decrement for Years 2–9, and schedules the terminal account cleanout for Year 10.

2. Beneficiary RMD Communications

The current Form 5498 instructions state that, until further guidance is issued, no RMD reporting (the Box 11 indicator or the Notice 2002-27 statement) is required for IRAs of deceased participants, except where a surviving spouse elects to treat the IRA as their own. Many custodians still send Track B beneficiaries an annual reminder of the year 1–9 RMD and the year-10 deadline as a service, because a missed beneficiary RMD triggers the IRC § 4974 excise tax.

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Realistic Bank Administrative Scenario: Sibling Beneficiaries and the 2024 Regulations

At First National Bank & Trust, CISP administrator Gregory manages the estate settlement for customer Eleanor, who passed away on September 20, 2024 at age 76 (born March 3, 1948, she reached age 70½ in 2018, so her Required Beginning Date was April 1, 2019). At her death, Eleanor held two accounts at the bank:

1. A Traditional IRA valued at $600,000.
2. A Roth IRA valued at $400,000.

Eleanor's beneficiary designation names her two healthy adult children, Mark (age 48) and Sarah (age 45), as equal 50% primary beneficiaries on both accounts. Eleanor had not taken any distributions during 2024 prior to her death; her 2024 Traditional IRA RMD was calculated as $25,316.46.

Administrative Resolution and Operational Execution

1. Year-of-Death RMD Settlement: Because Eleanor died post-RBD without taking her 2024 RMD, Gregory informs Mark and Sarah that the $25,316.46 shortfall must be distributed prior to December 31, 2024. Each sibling receives a distribution of $12,658.23 in late 2024, reported on Form 1099-R under their respective SSNs with Code 4.
2. Traditional Inherited IRA (Post-RBD Track B): Mark and Sarah each receive a $287,341.77 inherited Traditional IRA (after the 2024 RMD). Because Eleanor died post-RBD, the 2024 Final Regulations mandate that Mark and Sarah must take annual RMDs in years 1 through 9 (2025–2033) and empty their accounts by December 31, 2034. Assuming each share was worth $287,341.77 on December 31, 2024: in 2025, Mark turns 49 (Table I factor = 37.1); his 2025 RMD is $287,341.77 ÷ 37.1 = $7,745.06. Sarah turns 46 (Table I factor = 40.0); her 2025 RMD is $287,341.77 ÷ 40.0 = $7,183.54. (Each child's life expectancy is longer than Eleanor's remaining life expectancy, so the child's factor is the applicable denominator.) Gregory programs their accounts for annual Table I RMDs with the 1.0 factor reduction for years 2 through 9.
3. Roth Inherited IRA (Pre-RBD Track A): Mark and Sarah each receive a $200,000 inherited Roth IRA. Because Roth IRAs have no lifetime RMDs, Eleanor is legally deemed to have died before her RBD. Under Treasury Regulation § 1.408A-6, Mark and Sarah have zero annual RMD obligations in years 1 through 9. Gregory advises them that they may leave the funds completely untouched to compound tax-free until December 31, 2034, at which time the entire balance must be distributed tax-free.