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IRS Relief for Individuals Taking Retirement Plan Distributions in 2020

Sanford Stolar, CPA

7.2.20 | Client Alert – COVID-19 Update

Section 2203 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act temporarily suspends the required minimum distribution (RMD) rules for 2020. On June 23, 2020 the IRS released Notice 2020-51 which addresses certain distributions taken in 2020 from defined contribution plans and Individual Retirement Accounts (IRAs) in light of the CARES Act RMD relief. This notice explains how individuals can return unwanted distributions from eligible retirement vehicles and comes as welcome relief for many who thought they would not be able to reverse retirement distributions taken in 2020 to take advantage of the CARES Act suspension of RMDs.


The CARES Act temporarily suspends the required minimum distribution (RMD) rules for 2020. Generally, most individuals with IRAs and defined contribution plans are obligated to take RMDs from their plan(s) in 2020 if they were at least 70 ½ by December 31, 2019. Under the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), which became law on December 20, 2019, individuals reaching 70 ½ by 2019 must take their first RMD by April of 2020. However, if the individual does not reach 70 ½ until 2020 of later, the first RMD is not due until April 1st of the year after reaching age 72.  The CARES Act suspension of RMDs does not impact defined benefit plans.

Notice 2020-51

Generally, IRA or defined contribution plan distributions other than RMDs are not taxable if the IRA owner or defined contribution plan participant rolls the distribution over into an eligible retirement vehicle within 60 days of receipt. Notice 2020-51 treats RMDs taken in 2020 as eligible for this rollover and extends this 60-day rollover deadline for distributions that would have been considered RMDs absent the temporary suspension of RMDs provided by the CARES Act. The deadline to roll over distributions of this type is extended to until at least August 31, 2020. For example, an individual who erroneously took an RMD from an IRA in January 2020 has until August 31, 2020 to return the money to the IRA as a tax-free rollover.

The guidance also clarifies that these rollovers may be made to the same or different IRA. However, if the distribution is returned to the same IRA it will not count towards the one rollover per 12-month period limitation. Generally, an individual can only make one IRA to IRA rollover during a 365-day period.

Lastly, the restriction on rollovers for non-spousal beneficiaries of IRAs will also not apply for 2020 distributions that were mischaracterized as RMDs if the amounts are returned to the same IRA.

Notice 2020-51 also provides sample plan amendments that, if adopted, would offer participants a choice whether to receive waived RMDs and certain related payments.  An amendment is not required for IRAs.

As always, Berdon’s professionals remain available to consult and provide guidance during these trying times and will continue to provide updates as further guidance is released.

We encourage you to reach out to your Berdon Advisor to discuss how this guidance pertaining to IRAs and defined contribution plans applies to you.

Berdon LLP New York Accountants