Jul 01, 2020
The CARES Act waived the requirement for taking required minimum distributions (RMD) in 2020. However, it did not apply to all RMDs taken early in 2020 and there was a 60-day period to put back any RMDs that had been taken. The Internal Revenue Service recently provided additional relief in Notice 2020-51.
In particular, Notice 2020-51:
• permits rollovers of waived RMDs and certain related payments, including an extension of the 60-day rollover period for certain distributions to August 31, 2020;
• answers questions relating to the waiver of 2020 RMDs; and
• provides a sample plan amendment that, if adopted, would provide participants a choice whether to receive waived RMDs and certain related payments.
We are focusing on the first item above. The CARES Act enabled any taxpayer with an RMD due in 2020 from a defined-contribution retirement plan, including a 401(k) or 403(b) plan, or an IRA, to skip those RMDs this year. This includes anyone who turned age 70 1/2 in 2019 and would have had to take the first RMD by April 1, 2020. This waiver does not apply to defined-benefit plans.
An IRA owner or beneficiary who has already received a distribution from an IRA of an amount that would have been an RMD in 2020 can repay the distribution to the IRA by Aug. 31, 2020. The notice provides that this repayment is not subject to the one rollover per 12-month period limitation and the restriction on rollovers for inherited IRAs. Therefore, they could take a distribution in excess of RMD and be allowed one rollover within the 60 days or August 31st, whichever is later.
If you have already taken all or part of your RMD in 2020 and would prefer to take advantage of the CARES Act RMD waiver for this year, do not delay in returning the funds. You only have until August 31.
If you would like to discuss your specific situation, please reach out to the accountants and investment advisor representatives at Terry Lockridge & Dunn and World Trend Financial.They can be reached in Cedar Rapids at 319-364-2945 or in Iowa City at 319-339-4884.