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CARES Act RMD Waiver

2020 Required Minimum Distributions from Retirement Accounts

This video is an ACTEC Family Estate Planning Guide Special, created to inform viewers about changes to IRA distributions following the CARES Act. The CARES Act RMD waiver is only effective until August 31, 2020.

by ACTEC Fellows Stacy E. Singer and Svetlana V. Bekman

  Stacy-Singer Svetlana-Bekman
  Stacy E. Singer Svetlana V. Bekman

Due to COVID-19 and its economic implications, the IRS has changed the rules on IRA distributions. Learn what has changed with required minimum distributions (RMD) since the enactment of the CARES Act and recent IRS “Guidance on Waiver of 2020 Required Minimum Distributions” in this video featuring ACTEC Fellows Stacy E. Singer and Svetlana V. Bekman. Taxpayers must act by August 31, 2020 to take advantage of this change in RMDs.



Hi. I am Stacy Singer, an ACTEC Fellow from Chicago, Illinois. Due to COVID-19 and its economic implications, the IRS has changed the rules on IRA distributions. ACTEC, The American College of Trust and Estate Counsel, wants to help individuals and families to understand these new rules and their implications for individuals. To join me in helping understand these rules is ACTEC Fellow Svetlana Bekman from Chicago, IL.

Svetlana, let me start by asking, what are the basic rules for IRA distributions? When are distributions required?

Retirement accounts, including IRAs, are powerful saving vehicles because they allow for income tax deferred accumulation.  But at some point, a taxpayer must begin taking withdrawals - required minimum distributions (RMDs) - and those will be subject to income tax. So in 2020, the following taxpayers had an RMD: a person who attained age 70 1/2 in 2019, but did not take their first RMD in 2019, had an RMD payable by April 1 of 2020; the same taxpayer, or one who is older, also had an RMD due by December 31 of 2020; and finally a beneficiary of an inherited IRA, where the owner of the IRA died in 2019 or earlier, and who was using their life expectancy to calculate RMDs, had an RMD payable by December 31 of 2020.

And I should mention that we are not talking here about the SECURE Act. Some folks may be aware that in December 2019, Congress passed a law that significantly changed distribution rules for beneficiaries and somewhat for IRA owners. We’re not talking about that law here.

Svetlana, help us understand what is a rollover and when would that apply for an IRA?

Right, a rollover is simply taking a withdrawal from a retirement account and then putting the withdrawn amount back. And if this is accomplished pursuant to certain rules, then the withdrawn amount will not be taxed. And note that an RMD that we discussed earlier is not eligible for a rollover. And the most typical scenario, where a rollover happens, is a retiree retires, gets a check from their 401K provider and deposits that check with an IRA provider in order to continue to save on a tax-deferred basis until they reach their required beginning date, or RBD, when they have to begin taking distributions.

So how did the CARES Act and recent IRS guidance change these rules?

The CARES Act waived the 2020 RMD for many retirement accounts including IRAs. So, an owner of a retirement account who attained age 70 1/2 in 2019 but did not take their first distribution and has to do so by April 1 of 2020 does not have to take an RMD. An individual who otherwise would have an RMD payable by December 31 of 2020 does not have a 2020 RMD. A beneficiary who otherwise would have had to take a distribution by December 31 likewise enjoys - we'll call it an “RMD holiday.” And since no RMD is required in 2020, individuals who took it out and wish to put it back are eligible to accomplish a rollover.

Svetlana, I know there has been some recent IRS guidance that's an issue that changed some of these rules. Can you help us understand what impact that guidance had?

Sure. So by the time the CARES Act became law, many taxpayers already took their 2020 RMDs and couldn't put the withdrawn amounts back under the rules in existence at the time. So, those are the standard rollover rules: 1) that a rollover must be completed within 60 days of a withdrawal; 2) that a taxpayer can only do one rollover per 12 month period; and 3) that beneficiaries of inherited IRAs cannot do a rollover. So, in an effort to help taxpayers, the IRS granted some initial relief by extending the 60-day deadline to July 15, 2020. This was helpful, but for many they were still left in the lurch, namely folks who had already done a rollover per a 12-month period, beneficiaries, and also those who withdrew their RMD in January. So here comes the most recent guidance, which is Notice 2020-51, and it provides relief on a whole new level. So, what does it do? It waives the rule that there can be only one rollover per 12 month period and it even allows rollovers for inherited IRA distributions, provided the rollover is completed by August 31 and the amount that is being rolled over is only RMD. So basically, virtually every owner of a retirement account can return their 2020 RMD to their account.

Svetlana, do you have any final tips for us for folks who have an IRA with the required minimum distribution this year?

Yes, I want to emphasize again the importance of the August 31 deadline. So, if you are doing a rollover of your RMD, make sure that the funds actually land in the retirement account no later than August 31. In addition, if a taxpayer took out more than the RMD and they wish to roll that over, then the old rules apply. And, by the old rules I mean that any amount that is in excess of RMD must be rolled over within 60 days. There cannot be more than one rollover per 12-month period and beneficiaries cannot do a rollover.

Thank you so much, Svetlana for all of your great advice on this really complicated issue and thanks so much for watching.