The CARES Act was enacted to ease the effects of the economic damage caused by the COVID-19 pandemic by providing financial stimulus to individuals, families and the business community. Among the myriad of provisions contained in the CARES Act was the suspension of Required Minimum Distributions (RMDs) during 2020. However, as the CARES Act was not enacted until March 27, 2020, many individuals had already taken their 2020 RMDs during the first quarter of 2020.
Many retirement account owners wanted to avail themselves of the CARES Act and unwind those distributions that were no longer RMDs. For some retirement account owners, that was possible by making a 60-day rollover. But for retirement account owners whose 60-day rollover window had expired, or where such rollovers would have been a violation of the once-per-twelve month rollover rule, or where distributions were made to non-spouse beneficiaries, options were limited.
For those individuals who already took their Required Minimum Distributions but would like to take advantage of the deferral provisions of the CARES Act and unwind their RMD withdrawal decision, the IRS recently published relief in Notice 2020-51.
On June 23, the IRS released “Guidance on Waiver of 2020 Required Minimum Distributions” (Notice 2020-51), which addresses the issues noted above, allowing anyone who took a distribution (that, but for the CARES Act, would have been a RMD) to rollover that amount until Aug. 31, 2020.
Following is a summary of key takeaways set forth in Notice 2020-51:
- All distributions in 2020 from a Retirement Plan (“Plan”) or Individual Retirement Account (“IRA”) that were 2020 RMDs can be rolled over or put back into the Plan or IRA so long as the rollover is completed by Aug. 31, 2020.
- The ability to put the funds back into an IRA includes the ability of a beneficiary of an inherited IRA to return to the inherited IRA the funds distributed to the beneficiary as a 2020 RMD.
- A distribution in 2020 that is part of a series of substantially equal periodic payments may also be rolled over, although the plan participant cannot stop or cease those periodic payments in 2020 without penalty.
- The one rollover per 12-month limitation does not apply to 2020 RMD distributions.
- If a participant reaches his or her Required Beginning Date in 2020, no distributions need to be made in 2020 and any distribution in 2021 will only be for a 2021 RMD even if prior to April 1, 2021.
- If the participant or beneficiary dies in 2020, there is no extension of the five-year payout period that otherwise applies to distributions under the five-year rule for a participant who died prior to 2020, and there is no extension of the new 10-year payout rule enacted as part of the SECURE Act in Dec. of 2019.
If you have questions regarding your Required Minimum Distributions or the relief options described above, reach out to Kevin Lenhard at kjl@kjk.com or 216.736.7226, or any of our Estate Planning professionals.