What Did You Do with Your RMD?

July 17, 2020

What Did You Do with Your RMD?

In the past, the government has required anyone over the age of 70½ to withdraw a minimum amount of funds from their retirement plan. Beginning in 2020, you can suspend taking your Required Minimum Distribution (RMD), since this change in the law was contained in the CARES Act.

When the CARES Act was signed into law March 27, 2020 many people had already taken their RMD and would not have withdrawn funds from their retirement accounts, if they had known this was not a requirement.

The IRS released Notice 2020-51 on June 23, 2020 providing additional guidance on the waiver of 2020 required minimum distributions (RMDs) from certain retirement plans.

The CARES Act provided that RMDs for the year 2020 were waived from IRAs, as well as certain defined contribution plans, due to impact of the coronavirus.

This new guidance from the government provides additional details on the relief of the CARES Act. It also brings about planning considerations for taxpayers who have already taken 2020 RMDs or who plan to do so.

Highlights of New Guidance

Individuals now have until August 31, 2020 to repay, or roll over RMDs taken in 2020, that are no longer required under the CARES Act waiver. Amounts repaid to the same IRA will not be treated as a rollover for purposes of the rule-restricting, owners to one rollover in a 12-month period. The normal 60-day limitation on rollovers will not apply to RMDs received in 2020 that re rolled over by August 31, 2020.

The relief is provided for amounts that would have been RMDs in 2020. Amounts that are part of a series of periodic payments made annually over 10 or more years, or the individual’s life expectancy received in 2020, may also be rolled over.

Non-spouse beneficiaries of inherited IRAs who took RMDs in 2020, are also eligible to repay the amount to the same IRA by August 31, 2020.

Individuals who reached age 70½ in 2019 and deferred an initial 2019 RMD to 2020, are eligible for relief on such distributions that were deferred and taken in 2020.

Relief is also provided for individuals whose first RMD year is in 2020, with a required start date of April 1, 2021. Any distributions taken in 2021 will be considered to be for a 2021 RMD, even if the distribution is taken prior to April 1, 2021.

If you have any questions or request assistance, please contact our experienced BEI representatives, as we can help guide you with this new legislation.

Author: Robert Gorelick, APA, Founder Benefit Equity Inc.