Required Minimum Distribution (RMD) Changes Under The CARES Act

By Retirement

The CARES Act has suspended Required Minimum Distributions (RMDs) for several retirement plans, but not all. We’ve separated out what retirement plans had RMDs suspended for 2020 and which were not impacted by The CARES Act.

Suspended:

  • IRA RMDs (Including SEP and SIMPLE IRAs)
  • Defined Contribution Plan RMDs (401(k) and 403(b))
  • Federal Thrift Savings Plan RMDs
  • Governmental 457(b) Plan RMDs

Not Impacted:

  • Defined Benefit Plan RMDs
  • Non-governmental 457(b) Plan RMDs
  • Annuitized Annuities held in IRA, 401(k), 403(b), and other Defined Contribution Plan Accounts
  • 72(t) Distributions
  • Qualified Charitable Distributions

This is great news if you have a retirement plan requiring RMDs that you do not need.

If your first RMD was due in 2020 for year 2019, you are in luck. The CARES Act suspends any RMD regularly due in 2020, so if you had turned 70 ½ in 2019, normally your first RMD due date would be April 1, 2020. That means if you had not taken your 2019 RMD yet, you will have 2 years of RMDs suspended due to The CARES Act.

What do you do if you already took unwanted RMDs for 2020? The simplest way to fix this is to use the 60 day rollover window which allows you to roll the distribution either back into the original account or into an IRA, but only if it is within 60 days from when you received the distribution. If your took your distribution after February 1st, 2020 the 60 day rule is waived and you have until July 15th, 2020 to roll your distribution back into a retirement plan. Keep in mind you can only do this once every 365 day period.

Any distribution taken from a retirement account, including RMDs, that was distributed as a result of the Corona-virus is given 3 years to roll the distribution back into an account.

It makes sense in some cases to make a Roth conversion with your RMD. In this strategy you would still be paying taxes on the distribution now, but the money would receive tax free growth in your Roth IRA.

Contact us if you have any questions regarding your RMDs. If you would like to learn more about Corona-virus related distributions, directly from the IRS, we encourage you to do so here.