RMD Waiver Expanded for All Investors in 2020

by Bill Cass, CFP, CPWA, Putnam Investments

In response to the economic challenges posed by the pandemic, the CARES Act introduced a waiver for required minimum distributions (RMD) for owners of IRAs and retirement accounts for 2020.*

Subsequent guidance from the IRS allowed certain retirees who had already taken an RMD this year the ability to reverse the action and roll the funds back into their accounts. Specifically, IRS Notice 2020-23 allowed those who took a distribution between February 1 and May 15 the ability to roll those funds back into a retirement account by the extended tax filing deadline (July 15). However, some account owners who already took distributions earlier in the year were still not able to do so, including:

  • Those who took a distribution in January
  • Those who took multiple distributions, since the "once-in-12 months" rollover rule prevents them from using the 60-day rollover option on more than one distribution over a 12-month rolling period
  • Those who took RMDs from an inherited account since there is no 60-day rollover provision for inherited retirement accounts

In an attempt to provide relief to all account owners and beneficiaries who wish to reverse unwanted RMDs for 2020, the Internal Revenue Service (IRS) last week announced new guidance that will expand the ability to roll those funds back into a retirement account.

Guidance provides relief for all investors

The recent IRS Notice 2020-51 provides relief for everyone.

  • Retirement account and IRA owners who took an RMD anytime in 2020 (including January) are allowed to roll those funds back into a retirement account to avoid that RMD as long as action is taken by August 31, 2020.
  • Those who took an RMD over multiple distributions this year are able to roll funds back into a retirement account by August 31, 2020, to avoid an RMD.
  • Individuals with inherited IRAs are able to roll a previously taken RMD from this year back into the account to avoid a 2020 RMD. (The August 31 deadline also applies.)

Impact on planning Avoiding an RMD can help retirees preserve assets in their accounts, and can have an positive impact on retirement plans, especially when considering the impact of the pandemic crisis on retirement account values.

To learn more, read “Understanding the SECURE Act and its impact on planning.” (PDF)For more information on the CARES Act please read, “Understanding the CARES Act and its implications for individuals and businesses.” (PDF)

* Waiver of RMDs for 2020 does not apply to defined benefit plans.

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Cass, Bill. “RMD Waiver Expanded for All Investors in 2020.” Putnam Investments, 1 July 2020, www.putnam.com/advisor/content/wealthManagement/6259-rmd-waiver-expanded-for-all-investors-in-2020?et_site=eh_advisor.