While the CARES Act eliminated the requirement for individuals to take required minimum distributions (RMDs) from retirement plans in 2020, those who took their RMD before the Act’s passage found themselves in a sort of limbo solely due to timing.  According to existing rules, only those who took a distribution on or after February 1, 2020 could roll the distribution back into a plan or IRA and meet the 60 day rule.  Those who took a withdrawal in January had no such option.

To address this inequality, the IRS has issued Notice 2020-51, extending the 60-day rollover period for unwanted 2020 distributions from the previously stated July 15 to August 31, 2020, regardless of the date withdrawn.  Those who took out RMDs in January 2020 will now have until August 31 to rollover the money back into an IRA or a qualifying retirement plan.  This change also applies to Inherited IRA accounts.

The amount that can be rolled back is limited to the amount that would have been calculated as the RMD for 2020 had RMDs been required.  If the RMD was more than what was necessary to meet statutory guidelines, only the amount equal to the RMD can be rolled over tax-free.  On a positive note, the transaction does not count toward the one-rollover-every-twelve-months rollover limit.

Also worthy of note: to have the entire gross amount of the RMD excluded, people who withheld tax from their RMDs will have to add additional funds to the net amount they received. Taxes paid on RMDs are not being refunded and will be incorporated in 2020 income tax return calculations.

Please reference Notice 2020-51  for examples, Q&As, and sample provisions, or reach out to your SYM advisor for additional guidance.

 

DISCLOSURE: The opinions expressed herein are those of SYM Financial Corporation (“SYM”) and are subject to change without notice. This material is not financial advice or an offer to sell any product. SYM is an independent investment adviser registered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about SYM including our investment strategies, fees, and objectives can be found in our ADV Part 2, which is available upon request. SYM-20-76.