CARES Act Changes to Required Minimum Distributions

Are you subject to required minimum distributions (RMDs) from your retirement accounts?

The Coronavirus Aid, Relief, and Economic Stimulus (CARES) Act contains a number of provisions designed to provide relief to Americans and help the United States weather the economic storm brought about by COVID-19. Under Section 2203 of the Act, owners of defined contribution plans, like IRAs, 401(k)s, 403(b)s, and government sponsored 457(b) plans, can suspend their RMDs in 2020. Congress has recognized the impacts that a major downturn in the stock market can have on retirement accounts and created this new rule in order to give those accounts more time to recover from this recent downturn.

This new rule means that if you are required to take RMDs in 2020, and you are in an economic position where you do not need the money this year, you can opt to suspend taking those RMDs. This also means that you will receive a tax break when you file your taxes next year because you did not receive that retirement income this year. If you have taken your 2020 RMDs within the last 60 days, but still want to take advantage of this new rule, then you can opt to do a 60-day rollover of those funds to an IRA and not have those funds considered as a taxable distribution for 2020.

Please note that a 457(b) plan sponsored by a non-government tax-exempt employer does not qualify for the suspension. This new rule only applies to RMDs that you are required to take in 2020. Unless Congress acts further you should plan to continue taking your RMDs in 2021.

Contact your financial advisor and retirement broker to see if suspending your RMDs this year makes financial sense for you and your family, as well as the steps you need to take to do so.

By Kate Jaquith