3-Year Statute of Limitations - Missed RMDs
What You Need to Know About the 3-Year Limit on Missed RMD Penalties
Required Minimum Distributions (RMDs) can be complicated, especially when recent changes in legislation have introduced new timelines, exceptions, and penalty relief options. Missing an RMD used to trigger one of the harshest penalties in the tax code. While that penalty has been reduced, the IRS now allows even more leeway under SECURE Act 2.0. A key provision limits how long the penalty applies—giving account holders a clearer path to correct mistakes.
RMD Rules Can Be Confusing
RMDs start at a specific age—either 70½, 72, or now 73 depending on your birthdate. For inherited IRAs, distributions may follow a different timetable. Whether you’re using the Uniform Lifetime Table, Joint Life Table, or Single Life Expectancy Table depends on the type of account and the relationship to the original owner.
In addition, RMD obligations vary depending on account type. Roth IRAs are exempt from lifetime RMDs, while inherited Roth IRAs generally are not. Roth 401(k) assets were once included in RMD calculations, but beginning in 2024, they are excluded. To add more complexity, workplace retirement plans such as 401(k)s may delay RMDs if the individual is still employed.
With all these moving parts, it’s no surprise that mistakes happen. When they do, the consequences can be serious—but recent legislative updates may reduce that burden.
Penalties for Missed RMDs Have Changed
Previously, failing to take an RMD meant a 50 percent excise tax on the amount not withdrawn. Under SECURE 2.0, the penalty has been reduced to 25 percent, and to just 10 percent if corrected, typically within two years of the missed deadline.
Beyond these reductions, SECURE 2.0 added more good news: in some cases, the IRS may waive the penalty altogether for reasonable cause. One example involves year-of-death RMDs. If the beneficiary withdraws the missed RMD by their tax filing deadline (including extensions), the IRS may automatically waive the penalty.
A New 3-Year Statute of Limitations for Missed RMDs
A lesser-known provision of SECURE 2.0—Section 313—introduced a 3-year statute of limitations on missed RMD penalties. This means the IRS only has three years to assess the excise tax. Once that period passes, the penalty no longer applies, even if the RMD was never taken.
To illustrate, imagine an IRA beneficiary named Robert who inherited an IRA in 2017. He was supposed to begin taking RMDs in 2018 but didn’t. Under prior rules, every year without an RMD could trigger a penalty. With SECURE 2.0, Robert may only be liable for penalties in 2021 and 2022. He can exclude 2020 entirely due to the RMD waiver from the CARES Act. That would significantly limit his exposure compared to the previous rules.
Ambiguity Still Remains in the Law
Although the statute offers relief, the language in SECURE 2.0 is not fully clear. One interpretation is that the 3-year clock starts from the date the RMD was missed. Another more conservative reading suggests the clock starts with the law’s enactment at the end of 2022. Under that view, Robert would still be liable for penalties tied to 2018 and 2019.
Until the IRS releases official guidance, both interpretations remain possible. The takeaway is that the law now includes a clear statute of limitations, but how it applies to past cases is still open for debate.
Frequently Asked Questions
What is the new penalty for a missed RMD?
The penalty is now 25 percent, reduced to 10 percent if corrected within two years.
Does the penalty still apply indefinitely?
No. SECURE 2.0 created a 3-year statute of limitations for assessing the penalty.
Is the new rule retroactive to older missed RMDs?
Possibly. There is debate about whether the rule applies to pre-2023 RMDs. IRS clarification is expected.
What happens if I missed multiple RMDs before SECURE 2.0?
Depending on interpretation, you may only be liable for penalties on the most recent three years.
Can I get a penalty waived for reasonable cause?
Yes. The IRS continues to allow waivers if you explain the reason and correct the issue.
Plan With Accuracy
Missing an RMD doesn’t have to be catastrophic.
Schedule a complimentary consultation with a licensed advisor to review your situation and limit exposure.
Christian Cordoba, founder of California Retirement Advisors, has been a member of Ed Slott's Master Elite IRA Advisor Group since 2007.