On June 23, 2020, the IRS released two notices providing further guidance related to the Coronavirus Aid, Relief and Economic Security (CARES) Act that offers additional relief for individuals with retirement accounts.
Rollover relief for 2020 Required Minimum Distributions (RMD)
Under the CARES Act, RMDs from certain defined contribution plans and Individual Retirement Accounts (IRA) are waived for calendar year 2020. The IRS issued additional guidance for individuals who have already begun taking their RMD and wish to return the funds.
Any amounts distributed from an IRA during 2020 could be returned to the IRA by August 31, 2020. The repayment could be made more than 60 days after the distribution, did not count as a 60-day rollover, and could be made by beneficiaries of an inherited IRA.
For certain defined contribution plans, you could roll over a distribution that would have been considered the 2020 RMD. The 60-day rollover deadline was extended to August 31, 2020 for distributions made in 2020.
After August 31, 2020, clients can still do a 60-day rollover from an IRA to another IRA, subject to the one per 12-month limitation.
Tax that has already been withheld and remitted to the IRS will still need to be claimed on your 2020 tax return.
Coronavirus-related distributions from IRAs and qualified plans
The CARES Act allows a qualified individual under 59½ to take up to a $100,000 coronavirus-related distribution from their IRA or qualified plan, without incurring the standard 10-percent early withdrawal penalty.
A qualified individual may elect to pay all taxes on the distribution in the current tax year, spread the income over a three-year period, or roll the distributed amount into their IRA or qualified plan within a three-year period.
Recent guidance from the IRS expands the definition of “qualified individual” to include:
- You, your spouse or dependent if you are diagnosed with Covid-19; or
- You, your spouse or a member of your household if you experience adverse financial consequences as a result of:
- being quarantined, being furloughed or laid off, or having work hours reduced due to COVID-19;
- being unable to work due to lack of childcare because of COVID-19;
- closing or reducing hours of a business you own or operate due to COVID-19;
- having a reduction in pay (or self-employment income) due to COVID-19; or
- having a job offer rescinded or start date for a job delayed due to COVID-19.
The path to a secure retirement can be one with many questions, doubts and challenges. At Old National Wealth Management, we invest the time to understand your goals and the discipline to help you manage your assets accordingly.
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