The IRS has clarified some rule changes made by the CARES Act, which was passed and signed into law on March 27, 2020, to provide some relief to those affected by COVID-19. The CARES Act contains a provision waiving required minimum distributions (RMDs), meaning that those who would normally be required to take a certain amount of money out of their retirement plans and IRAs can forgo the minimum distribution for 2020.
The details were fuzzy until the IRS issued Notice 2020-51 on June 23, 2020. Although not every question has been answered, we now have guidance for some of the most critical issues. Here are the key points that the notice clarifies:
For whom have the required minimum distribution rules been waived? All required minimum distributions have been suspended for the year 2020. This applies to distributions from employer plans and IRAs to participants who have passed their required beginning date. It also applies to beneficiaries who have inherited a plan or IRA and have begun receiving required distributions (or would have begun in 2020).
Can a distribution from an employer plan be returned? If a participant in an employer plan (except for a defined benefit plan) has taken a required distribution in 2020 but would like to put it back into a tax-deferred plan, the participant may roll it over to a plan or IRA within 60 days of the distribution, or by August 31, 2020, if that is later. For example, if you took a required distribution from your 401(k) in January, you have until August 31 to roll it over into a new plan, an IRA, or back into the old plan (if that plan allows it).
NOTE: Rolling over a 2020 distribution from an employer plan is not an option for beneficiaries of inherited plans. This option is only for plan participants (or a surviving spouse).
Can a distribution from an IRA be returned? Note: This section does not apply to beneficiaries of inherited plans (see below). If the required distribution came from an IRA, the rules are different than for employer plans. IRA owners who took a required distribution can do either of the following:
Can a beneficiary of an inherited plan return a distribution? If a beneficiary took a distribution from an inherited plan, the beneficiary can return the required distribution to the *same* IRA by August 31, 2020. This is a repayment provision, and it is the only method available to a beneficiary who wants to return a 2020 required distribution to an IRA.
Effective: June 23, 2020