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RMD rollover relief granted under CARES Act

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Any client who already took a required minimum distribution in 2020 from certain retirement accounts can now roll those funds back into a retirement account following the CARES Act RMD waiver for 2020. The 60-day rollover period for any RMDs already taken this year has been extended to Aug. 31.

The IRS described the change this week in Notice 2020-51, which also answers questions regarding the waiver of RMDs for 2020 under the CARES Act.

The CARES Act enabled any taxpayer with an RMD due in 2020 from a defined-contribution retirement plan, including a 401(k) or 403(b) plan or an IRA, to skip those RMDs this year. This includes anyone who turned age 70-1/2 in 2019 and would have had to take the first RMD by April 1, 2020. This waiver does not apply to defined-benefit plans.

An IRA owner or beneficiary who has already received a distribution from an IRA of an amount that would have been an RMD in 2020 can repay the distribution to the IRA by Aug. 31, provided that this repayment is not subject to the limitation of one rollover per 12-month period and the restriction on rollovers for inherited IRAs.

The IRS notice also provides two sample amendments that employers may adopt to give plan participants and beneficiaries whose RMDs are waived a choice as to whether to receive the waived RMD.

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