RMD Age Is 73 Now, and the IRS Gave a Mulligan: What Notice 2023-54 Fixes

What SECURE 2.0 changed

The SECURE 2.0 Act, enacted December 29, 2022 as Division T of the Consolidated Appropriations Act, 2023, Pub. L. 117-328, raised the required-beginning-date age in § 107. An individual who attains age 72 after December 31, 2022 now begins required minimum distributions (RMDs) at age 73 rather than 72. The age is scheduled to rise again, to 75, in 2033.

The timing of the change created a specific problem. Someone born in 1951 turns 72 in 2023. Under the prior law, that person's first RMD year would have been 2023. Under SECURE 2.0, that person does not reach 73 until 2024, so the first RMD year is 2024 — not 2023.

But the law changed at the end of December 2022, after plans and custodians had already set their 2023 distribution processing in motion. The result: some 1951-born retirees took, or were on track to take, a 2023 distribution as an RMD that the law no longer required.

The first fix: a rollover deadline extension

A distribution that is not a required minimum distribution can generally be rolled back into a retirement account within 60 days, restoring its tax-deferred status. The 60-day window, however, had closed or was closing for many of the mistaken early-2023 distributions.

Notice 2023-54, issued July 14, 2023, extends that deadline. For affected IRA owners and plan participants born in 1951 who took a distribution between January 1 and July 31, 2023 that was treated as an RMD but was not in fact required, the deadline to roll the amount back was extended to September 30, 2023.

This is meaningful relief, and it is also time-limited. A retiree who received an unnecessary 2023 distribution and wants to undo it has a defined window to act. After that window, the distribution stands as a taxable event.

The second fix: continued penalty relief under the ten-year rule

The notice also addresses a separate and still-unsettled question affecting inherited retirement accounts.

SECURE 2.0's predecessor, the original SECURE Act, replaced the old stretch payout for many non-spouse beneficiaries with a ten-year rule. What remained unclear was whether a beneficiary subject to the ten-year rule — where the account owner died on or after the owner's required beginning date — must also take annual distributions during the ten years, or may wait until the end. Proposed regulations issued in February 2022 took the position that annual distributions are required, which surprised many practitioners who had read the rule otherwise.

Rather than enforce a penalty while the question remained open, the IRS waived it. Notice 2023-54 extends that relief to 2023: it will not assert the excise tax under § 4974 against a beneficiary who did not take a required annual distribution — a "specified RMD" — in 2023. This continues the relief the IRS had already provided for 2021 and 2022. The notice also states that the final regulations on this point will apply no earlier than 2024.

A lower penalty than before

The stakes of a missed distribution are themselves lower than they once were. SECURE 2.0 § 302 reduced the excise tax for a missed RMD from 50 percent of the shortfall to 25 percent, and to 10 percent if the shortfall is corrected within a defined correction window. The penalty for getting an RMD wrong is still real, but it is no longer the severe figure it was under prior law.

What this means in practice

For retirees and their advisors, two distinct actions follow. A retiree born in 1951 who took a 2023 distribution as an RMD should confirm whether it was actually required; if it was not, the rollover relief offers a path to undo it, within the deadline. A beneficiary navigating the ten-year rule should understand that the penalty for not taking a 2023 annual distribution was waived, but that the underlying question of whether such distributions are required is being resolved going forward, and the answer will govern future years. The defensible posture is to correct the 2023 distributions that the law no longer required, document the basis for any position taken under the ten-year rule, and plan the next several years around the rules as they are being finalized rather than the rules as they were assumed to be.

Key takeaways

• SECURE 2.0 § 107 raised the RMD beginning age to 73 for individuals attaining age 72 after December 31, 2022, so a person born in 1951 has a first RMD year of 2024, not 2023.
• Notice 2023-54, issued July 14, 2023, extended to September 30, 2023 the deadline to roll back 2023 distributions (made January 1 through July 31, 2023) that affected 1951-born owners took as RMDs but were no longer required.
• The notice again waived the § 4974 excise tax for beneficiaries under the ten-year rule who did not take a required annual distribution in 2023, extending relief previously granted for 2021 and 2022.
• The unresolved question of whether annual distributions are required within the ten-year window will be settled by final regulations applying no earlier than 2024.
• SECURE 2.0 § 302 reduced the missed-RMD excise tax from 50 percent to 25 percent, and to 10 percent if corrected within the correction window.

Frequently asked questions

If I was born in 1951, do I have to take an RMD for 2023?

Generally no. Because SECURE 2.0 raised the RMD age to 73 for individuals who turn 72 after December 31, 2022, a person born in 1951 reaches 73 in 2024, making 2024 the first RMD year rather than 2023.

I already took a 2023 distribution that turned out not to be required. Can I undo it?

Possibly. Notice 2023-54 extended the rollover deadline to September 30, 2023 for affected 1951-born owners who took such a distribution between January 1 and July 31, 2023. Rolling the amount back within that window restores its tax-deferred status.

What is the penalty for missing a required distribution now?

SECURE 2.0 reduced the excise tax from 50 percent of the shortfall to 25 percent, and to 10 percent if the shortfall is corrected within the statutory correction window.

Does the relief settle whether ten-year-rule beneficiaries must take annual distributions?

No. The notice waived the penalty for not taking a 2023 annual distribution, but the underlying question is being resolved by final regulations that will apply no earlier than 2024.