An important provision within the CARES Act is the suspension of Required Minimum Distributions ("RMDs") from qualified retirement plans and IRAs for 2020. 2019 RMDs that were not taken before January 1, 2020 and that were required to be taken by April 1, 2020 are also waived. There are no coronavirus eligibility requirements associated with this suspension. Taxpayers who have already taken some of their 2020 RMDs from one of their qualified retirement accounts have the opportunity to return the distribution back to the retirement account on or before August 31, 2020 without any penalties. Of course, you can elect to take your RMD as planned, as well as any other distribution that you might have normally taken.
When should you consider returning or not taking your RMD? If you don't really need the money right now, there is no reason to take it and pay tax on it this year. You can opt to defer it for the future and let the account continue to grow tax-deferred.
The retirement plans included in this provision consist of Traditional IRAs, SEP IRAs, SIMPLE IRAs, Inherited IRAs and employer plans such as 401(k), 403(b) and 457(b). Any RMDs from a defined benefit plan will not be eligible for suspension of taxable benefits.
If you have not taken your required minimum distribution yet, and you have the RMD set up to automatically distribute, and you do not wish receive the automatic distribution(s), you will need to contact the plan administrator to suspend the remaining 2020 RMDs.
We are here to help you navigate all aspects of the CARES Act and other recently enacted legislation. Please do not hesitate to reach out to us if we can be of assistance.