By Erika Apelis
In late March of 2020, the CARES Act was enacted in response to the Coronavirus pandemic. This law made a critical change for individuals receiving a Required Minimum Distribution (RMD) from a defined contribution plan such as an IRA, 401(k) or 403(b) plan.*
Federal law requires certain plans to make minimum distributions starting at a required beginning date. These are generally calculated by dividing an account balance by a life expectancy factor. Under pre-CARES Act laws, an individual who turned 70 ½ years of age during the tax year 2019 would be required to take their first RMD on April 1, 2020.
The CARES Act allows individuals to skip RMDs during the 2020 tax year. This waiver includes any individual who turned 70 ½ in 2019 and whose first RMD was taken by April 1, 2020. This ability to skip RMDs also applies to inherited IRAs. Many individuals receive their RMDs on a monthly basis and would have received several payments in 2020 before the pandemic hit our country and the enactment of the CARES Act.
To fix this and to allow taxpayers to take full advantage of the election against taking RMDs in 2020, the IRS recently announced that any individual who has already taken an RMD in 2020 from certain retirement accounts can now roll the funds back into a retirement account. The IRS extended the typical 60-day rollover period for RMDs already taken to Aug. 31, 2020 to allow individuals to take advantage of this opportunity.
If you have questions about this topic, or need help with your estate planning, please reach out to Erika Apelis at efa@kjk.com or 216.978.5353, or contact any of our Wealth & Estate Planning attorneys.
*Please note, this change does not include defined benefit plans.