72t Distributions and COVID Impact Forgiveness?

Submitted by Dwayne Adams on Wed, 2020-07-01 18:15

Are you aware of any provisions where an individual under the age of 59 1/2 can take additional withdraws from an IRA where there is a 72t distribution program because of adverse impact to their income from the COVID situation?



Submitted by Alan - IRA critic on Wed, 2020-07-01 18:51

  • Yes, Notice 2005-92 on which CRDs are based states that (Katrina) disaster distributions (CRDs in this case) are not considered in determining if the 72t plan requirements are met. The IRS has stated that CRD rules will be based on this Notice.  If such additional CRD withdrawal resulted in a 0 remaining balance, the 72t plan would just end with no penalty. Applicable provision is copied below:
  • H. Katrina distributions will not be treated as a change in substantially equal periodic payments.In the case of an individual receiving substantially equal periodic payments from an eligible retirement plan, the receipt of a Katrina distribution from that plan will not be treated as a change in substantially equal payments as described in § 72(t)(4) merely because of the Katrina distribution.

Submitted by David Mertz on Wed, 2020-07-01 19:13

IRS Notice 2020-50 SECTION 4.H (https://www.irs.gov/pub/irs-drop/n-20-50.pdf) says the same thing for Coronavirus-Related Distributions:

Coronavirus-related distributions will not be treated as a change in substantially equal periodic payments.  In the case of an individual receiving substantially equal periodic payments from an eligible retirement plan, the receipt of a coronavirus-related distribution from that plan will not be treated as a change in substantially equal payments as described in § 72(t)(4) merely because of the coronavirus-related distribution.

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