The Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law on March 27, 2020, changed the 2020 required minimum distribution (“RMD”) rules for any defined contribution retirement plan subject to RMD payments (such as an IRA or 401(k)). If you would have otherwise been subject to a mandatory RMD, you may choose to forgo those distributions for the 2020 year. This does not include an RMD to an individual who attained 70 ½ in 2019, who is required to take an RMD by April 2020. However, this otherwise applies to any required minimum distribution, whether the retirement account is your own or is an inherited retirement account.
If you do not plan on using your RMD payment to meet your expenses, you may find it beneficial to take advantage of this temporary rule change. This would allow the “untaken” 2020 RMD payment to grow with your remaining retirement account funds, tax deferred. It may also allow you to avoid liquidating a portion of your account to make the RMD payment in a volatile market.
If you have already taken your 2020 RMD, but wish to reverse it, there is an option available. However, you must act quickly. Although a previously taken RMD cannot be “reversed,” the IRS has issued Notice 2020-51, which allows you to “re-contribute” any previously taken RMD for 2020, so long as you do it prior to August 31, 2020. Generally, except as specifically provided in Notice 2020-51, the rules allow for taxpayers to re-contribute or rollover a distribution only once per twelve month period, but any re-contribution must be done within 60 days of the distribution, and a re-contribution is not available for inherited retirement accounts. However, Notice 2020-51 has briefly suspended these re-contribution limitations, and any re-contribution made before August 31, 2020, will not be subject to those limitations.