June 29, 2020
The IRS recently issued Notice 2020-51 providing guidance to the CARES Act required minimum distribution (RMD) waiver. Refer to JPS article posted on April 10, 2020, to learn more about the CARES Act provision.
Normally, RMDs from a pre-tax retirement plan, such as a 401(k), 403(b) or traditional IRA, must be taken out beginning at age 72 (RMDs are also required for those who reached the age of 70 ½ before January 1, 2020). In addition, RMDs are required by those, regardless of age, who inherit a traditional IRA or Roth IRA.
The CARES Act allowed a waiver from this distribution for 2020 and granted those who had previously taken out their 2020 RMD a limited time to return the distribution. However, the CARES Act was passed after some people had already taken a portion of their 2020 RMD. An existing rule allowed repayment of those funds within 60 days, but for some, it was too late for that. In April of this year, the IRS announced that withdrawals taken between February 1 and May 15 could be repaid by July 15, 2020, with no tax impact.
According to the IRS Notice issued on June 23, 2020, RMDs can be rolled back into their accounts tax-free by August 31, 2020. This date is for all RMDs that qualified for the waiver under the CARES Act.
One rollover per year:
The RMD repayment will be handled as a rollover but will not be included in the one rollover per year limitation, if completed by August 31, 2020.
Charitable IRA rollovers of up to $100,000 will not be counted as part of your annual RMD.
Withdrawals from defined-benefit plans do not qualify under the CARES Act waiver.
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