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IRS extends 2020 rollover period for retirement account RMDs

IRS extends rollover period for 2020 re: required minimum distributions for retirement accounts

Recently, the Internal Revenue Service (IRS) issued Notice 2020-51 to provide relief for taxpayers who had already taken required minimum distributions (RMDs) in 2020 before the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136, suspended the RMD requirement for 2020.

This taxpayer-friendly ruling means taxpayers who already took an RMD in 2020 from certain retirement accounts now can roll those funds back into a retirement account. To give taxpayers time to take advantage of this opportunity, the 60-day rollover period for any RMDs already taken this year has been extended to Aug. 31, 2020.

The CARES Act enabled any taxpayer with an RMD due in 2020 from a defined contribution retirement plan, including a 401(k) plan, 403(b) plan, or an IRA, to skip those RMDs this year. This includes anyone who turned age 70½ in 2019 and would have had to take their first RMD by April 1, 2020, under the law in effect before the enactment of the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, enacted on Dec. 20, 2019, as Division O of the Further Consolidated Appropriations Act, 2020, P.L. 116-94. The waiver of RMDs does not apply to defined benefit plans.

In addition to the rollover opportunity, IRA owners or beneficiaries who have already received a distribution from an IRA of an amount that would have been an RMD in 2020 can repay the distribution to the IRA by Aug. 31, 2020. This repayment is also not subject to the one rollover per 12-month period limitation and the restriction on rollovers for inherited IRAs.

The IRS notice provides two sample amendments that employers may use to give plan participants and beneficiaries whose RMDs are waived a choice of whether to receive the waived distribution, as well as 12 Q&As providing guidance about other issues related to the relief. Q&A-3 in the notice modifies Notice 2007-7, so that, if an employee died in 2019, a nonspouse designated beneficiary has until the end of 2021 to make a direct rollover and use the life expectancy rule.

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