The ERISA consultants at the Retirement Learning Center Resource regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings plans. We bring Case of the Week to you to highlight the most relevant topics affecting your business.
A recent call with a financial advisor from Maryland is representative of a common inquiry related to the 2020 waiver of required minimum distributions and rollovers. The advisor asked:
“Can you remind me of the key points related to the waiver of RMDs for 2020?”
Highlights of the Discussion
This is a timely question, as Aug. 31, 2020 is a key deadline by which certain rollovers of 2020 RMDs must be accomplished. Specifically:
- Section 2203 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act waives RMDs for IRAs, defined contribution, 403(a) qualified annuity, 403(b) or governmental 457(b) plans for 2020.
- Defined benefit plans are not covered by this wavier.
- As an added bonus under the CARES Act, and as clarified by Notice 2020-51, a distributed amount that otherwise would have been an RMD for 2020 is eligible for rollover, including:
- first-year 2019 RMDs that were taken by April 1, 2020;
- first-year 2020 RMDs due to be taken by an April 1, 2021; and
- amounts that are part of a series of periodic payments (that include a 2020 RMD) made at least annually over life expectancy, or over a period of 10 or more years.[1]
- The deadline for rolling over 2020 RMDs is the later of Aug. 31, 2020, or 60 days after receipt of the distribution.
- A 2020 RMD that is rolled over by the Aug. 31, 2020 deadline does not count toward the one-rollover-per-12-month rule applicable to IRA-to-IRA rollovers.
- Nonspouse beneficiaries also are allowed to roll over 2020 RMDs if they do so by Aug. 31, 2020.
- A 2020 RMD from a plan or IRA may be rolled back into the same plan or IRA (provided the plan permits incoming rollovers).
Conclusion
The CARES Act waives the necessity to take 2020 RMDs from IRAs and most qualified retirement plans. Aug. 31, 2020 is a key deadline by which certain rollovers of 2020 RMDs must be accomplished. Please refer to IRS Notice 2020-51 for additional guidance.
Any information provided is for informational purposes only. It cannot be used for the purposes of avoiding penalties and taxes. Consumers should consult with their tax advisor or attorney regarding their specific situation.
©2020, Retirement Learning Center, LLC. Used with permission.
[1]Not to be confused with substantially equal periodic payments exempt from the 10% early distribution penalty tax under Code Section 72(t).
