IRS Grants Rollover Relief for 2020 Required Minimum Distributions
On June 23, 2020, the IRS announced in Notice 2020-51, that individuals who have taken required minimum distributions (“RMDs”) in 2020 may now roll those funds back into a retirement account. This guidance is in connection with the CARES Act’s temporary suspension of all RMDs for calendar year 2020. (For more information regarding the CARES Act’s waiver of 2020 RMDs, click here).
Because the CARES Act wasn’t enacted until late March, it’s possible that participants had taken their RMDs for this year before realizing it wasn’t required. The IRS’s guidance therefore comes as a welcome relief to individuals who took RMDs this year, and specifically provides:
- Rollovers of Waived RMDs Permitted. Taxpayers who received RMDs in 2020 may roll the distribution over into an eligible retirement plan. The guidance also provides that RMDs paid to plan participants in 2021 for the 2020 calendar year (i.e., in the case of an employee with a required beginning date of April 1, 2021) may be rolled over.
- 60-Day Rollover Period Extended. The Notice extends the 60-day rollover period for exempt RMDs to August 31, 2020. This means that any individual who received an RMD in 2020 can now wait to repay the distribution to an eligible retirement plan or IRA until August 31, instead of having to do so within 60 days of the distribution, without incurring any adverse tax consequences. Rollovers made pursuant to Notice 2020-51 are also not subject to the one rollover per 12-month period limitation or the restriction on rollovers for inherited IRAs.
- Sample Plan Amendment. The Notice provides two sample plan amendments in connection with the RMD relief granted under the CARES Act. Amendments must be adopted by December 31, 2022 (or December 31, 2024, for governmental plans).
- Q&A Guidance. The IRS responds, in a question-and-answer format, to a number of concerns related to the CARES Act’s temporary suspension of RMDs. The Q&A guidance clarifies that an RMD made from a plan may be rolled back over into the same plan, provided the distributing plan permits rollovers.