IRA owners, beneficiaries or workplace retirement plan participants who received a Required Minimum Distribution (RMD) this year have until August 31 to rollover or repay the distribution to avoid paying taxes. The IRS issued a reminder on this topic today, summarized below:
The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, waives RMDs during 2020 for IRAs and retirement plans, including for beneficiaries with inherited accounts. This waiver includes RMDs for individuals who turned age 70 ½ in 2019 and took their first RMD in 2020. Roth IRAs do not require withdrawals in most cases.
Individuals who took RMDs in 2020, including those who turned 70 ½ during 2019, have the option of returning the distribution to their account or other qualified plan. Since the RMD rule is suspended, RMDs taken in 2020 are considered eligible for rollover. Therefore, RMDs can be rolled over to another IRA, another qualified retirement plan, or returned to the original plan by August 31, to avoid paying taxes on that distribution.
What Type of Plans Does the CARES Act Provision Apply to?
- SEP IRAs,
- SIMPLE IRAs,
- 401(k) plans,
- 403(b) plans,
- 457(b) plans,
- Profit sharing plans, and
- *Other defined contribution plans.
*The RMD suspension does not apply to qualified defined benefit plans.
For More Information
IRS Notice 2020-51 (PDF) also provides that the one rollover per 12-month period limitation and the restriction on rollovers to inherited IRAs do not apply to this repayment. More information on the CARES Act and retirement plans, including FAQs, can be found on the Coronavirus-related relief for retirement plans and IRAs questions and answers page.
Contact your Lurie Advisor for questions or assistance.