Required Minimum Distribution

by John Bruggemann, CFP

On Tuesday, June 23, the IRS announced a few important modifications to the original changes made by the CARES Act regarding RMDs (required minimum distributions) taken from an IRA and defined contribution plans in 2020.

As you may recall, the CARES Act waived 2020 RMDs as well as first-time 2019 RMDs delayed until 2020. Many people had already received RMDs before the CARES Act was signed into law (March 28),and wanted to return these distributions to avoid paying the tax. The IRS extended the 60- day rollover deadline until July 15 for distributions taken after January 31, 2020. Those taking distributions before January 31 were out of luck, until this past Tuesday.

The IRS Notice 2051- 51 offers three modifications:
1.  ANY RMD taken in 2020 by both an IRA owner or owner of a non-spousal inherited IRA, including those taken in January, can be ‘returned’ to the account.
2.  ALL distributions, even those taken monthly, can be returned to the account.
3.  The rollover deadline has been extended from July 15 to August 31, 2020.

Notice 2020-51 applies only to RMD payments and does not include withdrawals of non-RMD funds. These withdrawals are still bound to the usual 60-day rollover deadline, or the July 15, 2020 deadline for distributions made after January 31, 2020. In addition, distributions of amounts other than RMDs are still subject to the once-per-year rollover rule.

Should you have any questions regarding the recent ruling, or would like to take advantage of the IRS’ generosity, please contact your ACM Advisor.

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