By Peter Reiss
Required Minimum Distributions Suspended for 2020
The CARES (Coronavirus Aid, Relief, and Economic Security) Act suspended the requirement that taxpayers take required minimum distributions (RMDs) in 2020 from 401(k), 403(b) or other company plans, or from individual retirement accounts. This is a welcome relief for clients who do not need to take distributions (which are taxable) but are normally required to do so.
If you have already taken your 2020 RMD, there is no provision in the law that allows you to return it. However, you may, within 60 days of your receipt of the distribution, deposit it into another IRA or retirement plan. Unfortunately, this rollover option is not available to a beneficiary of an Inherited IRA. If taxes have been withheld from your distribution, you will have to use other funds if you wish to roll over the full amount of the distribution. Note that if you miss the 60-day deadline, the IRS may waive the requirement “because of circumstances beyond your control.” Be aware that taxpayers are limited to one 60-day rollover in any 12-month period.
If you have already set up automatic annual RMD distributions with your plan administrator, you should notify the administrator if you wish to forego your 2020 distribution. If your plan administrator typically does not make your RMD until you notify the administrator, you probably do not have to do anything to skip the RMD this year, although it certainly would not hurt to reach out to confirm your intentions.
Under the 2019 SECURE Act, beneficiaries of Inherited IRAs may no longer “stretch” their RMDs over their life expectancies; these accounts must be fully distributed within 10 years of the account owner’s death. There are exceptions for spouses, minors, disabled individuals and beneficiaries not more than 10 years younger than the decedent. Unlike with RMDs, however, there is no requirement that distributions be taken annually. Funds may be taken in any amount, at any time, within the 10-year period.
This article is not legal advice and is provided for informational purposes only. Actual legal advice can only be provided after consultation by an attorney licensed in your jurisdiction.