31 Mar How Does The CARES Act Impact Your IRA and Retirement Plans?
The Coronavirus, Aid, Relief and Economic Security Act (The CARES Act) was signed into law On March 27, 2020. There are some key impacts to Individual Retirement Accounts (IRAs) in 2020. While there are many provisions to the Act, here are some the provisions impacting IRAs and Retirement Plans:
Temporary Waiver of Required Minimum Distribution (RMDs) Rules for Defined Contribution Plans, including 401(k), 403(b), 457, as well as IRAs
Required minimum distributions (RMDs) rules are waived for 2020 distributions from IRAs, including Inherited IRAs and 2019 RMDs not taken in 2019 with a required beginning date of April 1, 2020.
- An RMD that has already been taken in 2020 AND meets the following conditions, may be rolled back into the IRA:
1. It was taken less than 60 days ago
2. No IRA-to-IRA 60 day rollover contribution was completed in the last 365 days
- Under current rules, a distribution taken from an Inherited IRA cannot be rolled back into the Inherited IRA or the individual’s own IRA.
- There may be additional relief for any distribution taken that does not meet these requirements.
Penalty Free Distributions from IRAs and Certain Retirement Plans
Distributions to Qualified individuals from IRAs and retirement plans received during 2020 of up to $100,000 for COVID-19 are exempt from the 10% additional tax for early or pre-59 ½ distributions. These amounts are not subject to the 20% withholding requirements for qualified retirement plans. Qualified individuals include a COVID-19 diagnosis for an individual, their spouse or dependent, and financial hardship as a result of business closures, reduced work hours, lay off, furlough, lack of child care or other factors as determined by the Treasury Secretary.
- Option to spread the taxable income over a three-year period
- Repay any or all of the distribution to a retirement account over the next three years.
- Repayments not subject to retirement plan or IRA contribution limits
Our goal is to provide you with as much information as quickly as available and possible. Please contact our office with any questions.