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RMD FAQs: Eight important facts


Individuals 08.06.2020 3 MIN READ


The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) includes a provision that allows individual retirement account (IRA) owners and participants in certain plans to elect not to receive required minimum distributions (RMD) in the 2020 calendar year.

RMD waivers under the CARES Act

The Senate version of H.R. 748, the CARES Act was passed by the House on Friday, March 27, 2020, and signed into law by the President on the same day. The Act includes a provision that allows individual retirement account (IRA) owners and participants in certain defined contribution plans to elect not to receive required minimum distributions (RMD) in the 2020 calendar year (2020 RMD) with respect to those accounts and plans (including individual retirement annuities that have yet to be annuitized and 401(k), 403(b) and governmental 457(b) plans).

The following is a list of answers to frequently asked questions about the application of the 2020 RMD waiver. Please note that the IRS is continuing to provide guidance on CARES Act provisions, including RMD waiver‐related issues, and the answers below may change or require modification as a result of such guidance.
 

  1. I turned 70½ in 2019 and deferred my first RMD into 2020. Is that RMD waived?

    Yes. If you did not take the distribution in 2019, the RMD that was previously required to be taken by April 1, 2020 is waived. If you deferred the RMD into 2020 and have already taken the distribution in 2020, you may be able to rollover the distribution into an eligible account if you meet the requirements for a 60‐day rollover. Rollovers are subject to complex rules and requirements, and the IRS may issuance further guidance regarding rollovers. Please consult your personal tax advisor regarding rollovers and your individual circumstances.

    If you chose not to defer your first RMD into 2020, the RMD waiver does not apply to the distribution you took in 2019. Accordingly, the distribution you received in 2019 will be included in income in 2019 for purposes of your 2019 tax return.

  2. Does the 2020 waiver mean I will need to take two RMDs in 2021?

    No. This is not a deferral of the 2020 RMD. Rather, it is a complete waiver. Note that your RMD for 2021 will be calculated based upon the value of your account on December 31, 2020, which will include any amounts NOT distributed in 2020 due to the waiver.

  3. What if I already took my RMD for 2020? Is there any way to “undo” the distribution?

    You may be able to rollover the distribution into an eligible account if you meet the applicable requirements. In general, distributions of amounts that otherwise would have RMDs in 2020 are eligible for rollover.

  4. Does the waiver apply to an inherited retirement plan account such as a 401(k) plan or an inherited IRA?

    Yes. The rules regarding distributions from inherited IRAs are complex. Please consult your personal tax advisor regarding your specific circumstances.

  5. I inherited an IRA from my uncle in 2018 when he died before he reached age 70½, and I must take a complete distribution from the inherited IRA by the end of the fifth year following the year of his death (i.e., 5‐year rule). Does the waiver impact me?

    Yes. The year 2020 will be disregarded for purposes of the 5‐year rule. This means that instead of being required to take a complete distribution by December 31, 2023, you have an additional year to make the complete distribution (i.e., until December 31, 2024).

  6. I already took an RMD for 2020 from the IRA I inherited from my father. It has been less than 60 days from the distribution. Can I rollover the distribution?

    No. An account inherited by a non‐spouse beneficiary is not eligible for any rollovers.

  7. Does this waiver impact my ability to make a Qualified Charitable Distribution (QCD) for 2020?

    No. You can still direct that up to $100,000 from your IRA go directly to a qualified charity without having to pay income tax on that amount if the distribution meets the requirements of a QCD and you are at least 70 ½ years old.

  8. Does the waiver apply to a defined benefit pension plan?

    No. The waiver does not apply to defined benefit plan accounts.

 

 


 

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