CARES Act, Periodic RMD payments & the 60-Day Rule
If a person receives monthly distributions from her IRA, will she be able to roll multiple payments (received within 60 days of rollover) back into her IRA?
Example:
Carol has a $12,000 RMD for 2020. She draws $1,000 on the 15th of each month from her IRA. Prior to passage of the CARES Act she withdrew $3,000 from her IRA ($1,000 each on January 15th, February 15th & March 15th). Assuming this were her only IRA and her only attempted rollover for 2020, would she be able to return $2,000 (two distributions) to her IRA (with one, $2,000 deposit) without running afoul of the rule limiting IRA owners to one 60-day loan/rollover per year?
Many thanks!
Rob
Permalink Submitted by Alan - IRA critic on Thu, 2020-04-02 00:09
Since rollovers are measured by the number of distributions, she can only roll back 1,000 (one distribution). However, if her distributions eventually qualify as CV related (after further IRS guidance or legislation), she can roll them all back with a 3 year deadline from the respective distribution. Since she has considerable time to roll back the 3/15 distribution she might wait awhile before rolling it back and using up her one allowed rollover for only 1000. If she (in fact if everyone is deemed to qualify for CV treatment she can roll them all back with only a 3 year time limit. Otherwise, she uses up her one rollover and will have to wait and see about the other 2000. Of course, if she is directly impacted by the virus she is OK to roll them all back right now, but most people will have to qualify by being impacted indirectly and the IRS decides that everyone qualifies. If she does qualify for the CV distribution, she would need to certify (probably a form) when doing the rollover as that would permit the custodian to ignore the number of distributions and 60 day time limits. It is widely believed that the IRS will broaden the eligibility requirements for such rollovers.
Permalink Submitted by Rob Lane on Thu, 2020-04-02 18:23
Hi, Alan. Thank you for your great answer! If she received unequal distributions from her IRA (say $10K in February and $1K in March), would she be able to choose which distribution to rollover? Could she elect to use the larger February distribution?Many thanks,Rob
Permalink Submitted by Alan - IRA critic on Thu, 2020-04-02 19:30
Whether she qualifies for the 3 year rollback or not, she can choose which contribution is rolled back before the deadline (3 years if qualified or 60 days if not). Therefore, even if she does not qualify for the CV related distribution, she can roll back the larger Feb distribution if within 60 days, and not roll back the other. And she cannot have done another 60 day rollover in the prior 12 months to the Feb distribution.
Permalink Submitted by Rob Lane on Thu, 2020-04-02 20:52
That is just what i needed to know. Thank you!