CARES Act: Required Minimum Distributions (“RMDs”) for 2020

The Coronavirus Aid, Relief, and Economic Security Act or “CARES” Act enacted by Congress and signed into law by President Trump on March 27, 2020, aimed to provide financial relief and incentives to American families and businesses.  The highlights many people may be familiar with are:

  • Eligible taxpayers received $1,200 checks;
  • Forgivable loans to businesses to maintain their employees and businesses.
  • Incentives for charitable donations in 2020.

The Act also provided relief with regard to retirement assets, such as foregoing Required Minimum Distributions (RMDs) for 2020 from most retirement plans and allowing participants to take distributions from retirement plans in 2020 without a penalty due to hardships posed by the Coronavirus, with the option to repay Coronavirus related distributions or pay the tax on these distributions over three years.  However, as the saying goes, the devil is in the details. As a result, subsequent guidance has been issued by the IRS and other agencies regarding the details that were not included in the Act itself.

One important detail that has been addressed is the repayment of RMDs that individuals received this year prior to the enactment of the CARES Act. Initially, the guidance provided that those distributions could be paid back to the plan within sixty days. This was a tight window that many individuals may have been unaware of or lacked the ability to address while most of the country was in lockdown mode. However, IRS Notice 2020-51, issued in late June, has extended the repayment deadline to August 31, 2020. Since RMDs are taxable, anyone who received an RMD in 2020, is in a position to repay it, and wants to postpone the related taxes should contact their financial advisor or plan retirement plan administrator or custodian without delay to make the repayment before it is too late.