Required Minimum Distributions for Retirement Accounts: Extended Rollover Period for 2020

IRS Notice 2020-51 describes a taxpayer-friendly change to required minimum distributions (RMDs) from retirement accounts. This provision is an additional relief measure under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

Taxpayers who took an RMD from a defined contribution retirement plan at any time during 2020 can return that RMD into the retirement account by August 31, 2020. RMDs are typically not allowed to be re-contributed to the plan that they were made from or rolled over into another tax-qualified retirement plan or Individual Retirement Account (IRA). The August 31 deadline is an extension of the standard 60-day rollover period for qualified plan distributions and was created as an added relief measure under the CARES Act.

Marcum is issuing this Tax Flash as a reminder to readers concerning this new deadline and, if applicable, the need to make a decision and take action.

Taxpayers who took RMDs from a 401(k) plan, profit sharing plan, money purchase pension plan, 403(b) plan, 457(b) plan, or IRA are eligible to take advantage of this extended rollover period. Taxpayers who turned 70 1/2 in 2019 and who were mandated to take RMDs starting April 1, 2020, are also eligible to return RMDs to their retirement accounts. The only plans not eligible for the rollover are defined benefit plans. RMDs taken after July 1, 2020, have 60 days to roll over the distribution.

RMD repayments will not be subject to either the one–rollover-per-12-months limitation or the inherited IRA rollover limitations normally imposed by the IRS. In addition, there is no requirement to amend an IRA to reflect the waiver of the RMD for this year.

If you believe you are eligible to return a distribution, contact your Marcum tax professional.

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