CARES Act Update: 2020 RMD Rollover Relief
IRS Notice 2020-51: On June 23, 2020, the IRS released Notice 2020-51 providing guidance on the waiver of 2020 required minimum distributions (RMDs) as permitted under the CARES Act.
As background, eligible rollover distributions are not includible in gross income if rolled over within 60 days of receipt, and the IRS may waive the 60 day rollover deadline in certain circumstances. RMDs are generally not considered to be eligible rollover distributions. As reported in the February, 2020 Legal Alert, the SECURE Act changed the required beginning date to April 1 of the calendar year following the calendar year in which the individual attains age 72 (instead of 70 ½), and the new required beginning date applies to RMDs made after December 31, 2019, with respect to individuals who attain age 70 ½ after that date. However, in response to the COVID-19 health crisis, later guidance issued under the CARES Act provides that individuals are not required to take RMDs for the remainder of 2020, as discussed in the March, 2020 Monthly Minute.
Consistent with the intent of the CARES Act to permit individuals to avoid taking RMDs in 2020, Notice 2020-51 provides further relief by allowing those who received certain distributions to roll them into an eligible retirement plan. Specifically, Notice 2020-51 permits rollovers of 2020 RMDs and extends the normal 60-day rollover period to August 31, 2020. In a series of Q&As, the notice also specifies that such distributions may be rolled over back into the same plan, provided the plan permits rollovers and all other requirements are satisfied, and confirms that the waiver of 2020 RMDs under the CARES Act does not apply to a defined benefit plan.
In addition, the Q&A series in Notice 2020-51 addresses other questions relating to RMD waivers, rollovers and required beginning dates, and also provides a sample plan amendment to implement the waiver of RMDs under the CARES Act and RMD direct rollovers. The Q&As and sample amendment can be found here.
KMK Comment: Through Notice 2020-51, defined contribution plan participants who already took RMDs in 2020 now have the chance to roll those funds back into a retirement account. Although this new guidance does not set forth specific notification requirements, plan sponsors will want to determine how best to notify participants about this new rollover opportunity and ensure plan operations reflect the new RMD waiver and rollover practices.
The KMK Law Employee Benefits & Executive Compensation Group is available to provide you with more information about these requirements.
Lisa Wintersheimer Michel
Partner
513.579.6462
lmichel@kmklaw.com
John F. Meisenhelder
Partner
513.579.6914
jmeisenhelder@kmklaw.com
Helana A. Darrow
Partner
513.579.6452
hdarrow@kmklaw.com
Antoinette L. Schindel
Partner
513.579.6473
aschindel@kmklaw.com
Kelly E. MacDonald
Associate
513.579.6409
kmacdonald@kmklaw.com
KMK Employee Benefits and Executive Compensation email updates are intended to bring attention to benefits and executive compensation issues and developments in the law and are not intended as legal advice for any particular client or any particular situation. Please consult with counsel of your choice regarding any specific questions you may have.
