CARES Act for Retirees- Required Distribution (RMD) Allowances

TPC planning and Tax teams

On Friday, March 27th President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law.

This legislation is being billed as the largest aid and relief act in the history of the United States, and is designed to support individuals and businesses as we all weather this Coronavirus 19 (CV19) storm.

For those that fall under the IRS Required Minimum Distribution (RMD) rules in 2020, the CARES Act provides the following relief:

  • All RMDs not already taken in calendar 2020 under normal IRS rules are now waived. If you were otherwise required to take a distribution from an IRA or employer retirement plan this year that is no longer the case.
  • This includes individuals who were required to take their first RMD in 2019 and waited, under the IRS provisions, to take this distribution before April 2020. These individuals are no longer required to take either the 2019 or the 2020 RMD.

All RMDs not already taken in calendar 2020 for those with Inherited IRA accounts (non-spousal IRA beneficiaries), you do not have to take those distributions in 2020.

  • For those who inherited IRA assets through a non-see through Trust or other entity for which the “5-year rule” applies, you do not have to take a distribution for 2020, and the 2020 calendar year will not apply as one of the 5 years.
  • You effectively now have a “6-year” rule.

For those taxpayers who do not take their RMD in calendar 2020 under the new rule, you’ll calculate RMDs normally in future years.

  • In other words, you do not have/get to use the 2020 divisor or life expectancy numbers from 2020 when calculating the 2021 RMD.

For those who have taken RMDs from January 1, 2020 through the signing of this bill, the following options exist:

  • Keep the distribution and report as taxable income on your 2020 return.
  • Many clients use the RMDs to help support their normal retirement income stream, and distributions are still allowed, simply not “required”.
  • Roll back to your IRA using the normal 60-day rollover rule.
  • If you had taken your distribution within the past 60 days, you’re allowed to put the full amount (including any amounts withheld for tax) back into the IRA as a “rollover”, eliminating the need to report as income in 2020.
  • The “once per year rollover” rule still applies, so if you have completed a rollover to the IRA within the past 365 days this option no longer applies.
  • Roll back as a “Corona Related” Distribution
  • The bill stipulates certain circumstances for which someone under 59.5 years old could withdraw funds from their IRA. Even as a taxpayer of RMD age, if you qualify for one of these stipulations you may be able to “roll back” that distribution within 3-years of having taken it.  Coordinate this with your TPC planner.

If you’ve taken your Inherited IRA RMD already in 2020, there are no options to roll those funds back into the account.

We’re living in volatile times, and we’re ready to work with you to find the right path forward with respect to your 2020 RMDs. Please contact us with any questions you may have!



The Planning Center is a fee-only financial planning and wealth management firm. 

Email us at: clientservices@theplanningcenter.com.

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