The Setting Every Community Up for Retirement Enhancement (SECURE) Act increased up the age that triggers required distributions for retirement-plan account owners from age 70½ to age 72. This change applies only to owners reaching age 70½ in 2020 or later. For owners who reached age 70½ in 2019 or earlier, it was supposed to be business as usual. Enter the CARES Act.
As noted, the CARES Act waives RMDs for owners of retirement plans (other than defined benefit plans) in 2020. Here’s a breakdown of this relief.
Here’s an example. Joe reached age 70½ on 12/31/19. Under the SECURE Act, he is still required to take an RMD for 2019, his first distribution year. This distribution would ordinarily have a deadline of 4/1/20 (Joe’s RBD). A second distribution for 2020 (Joe’s second distribution year) would also ordinarily be due. Its deadline would have been 12/31/20. On 3/27/20, the date of enactment for the CARES Act, Joe had not taken either RMD. Thanks to the CARES Act, both of these distributions are waived for Joe. If Joe had taken his first-year distribution during the first few months of 2020, he may be able to roll it over (as explained below).
2020 is likely to be a confusing time for retirement-plan account owners for lots of reasons, including RMDs. We hope the information in this post helps.
If you have any questions regarding this or the CARES Act, please contact the Retirement Strategies Group at (800) 722-2333, or email us at RSG@PacificLife.com.
1The IRS may provide specific relief for the 60-day deadline for rollovers at some point during the year, as it did during the 2009 RMD waiver. It has already provided relief for many deadlines in IRS Notice 2020-23. This IRS Notice provides an extension to July 15, 2020, of the 60-day deadline, but only for those who took an unwanted “non-RMD RMD” between February 1 and May 15, 2020. No relief yet for those taking these payments in January, 2020, so stay tuned for additional guidance.
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