72t and Cares Act

Submitted by Keith Parker on Tue, 2020-09-29 14:54

Client began 72t withdrawals 15 months ago. Just found out his wife has lung cancer. Wants to withdraw an extra $100,000 penalty free through CARES Act provision and keep the 72t withdrawals in place. Is this extra withdrawal allowed because of CARES or will it blow up the 72t structure?



Submitted by Alan - IRA critic on Tue, 2020-09-29 19:02

IRS Notice 2020-50, Sec 4 (H) states that a CRD does not affect a 72t plan. Therefore, the client is able to take a 100k CRD from the 72t plan account and continue the plan as originally calculated. In other words, the total distribution for 2020 will be the 72t amount plus 100k. The CRD will be reported on Form 8915 E and client can elect to report the CRD income ratably for 3 years (2020-2022).

Submitted by David Mertz on Tue, 2020-09-29 22:22

Make sure that the client meets the requirements to be eligible receive a Coronavirus-Related Distribution.  If the client does not meet the requirements, the extra distribution would not be a CRD and would bust the 72(t) plan.

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