Rolling Over an RMD, Part 2 – “Just Wait a Minute”

Wednesday, April 15, 2020

By Andy Ives, CFP®, AIF®
IRA Analyst
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I grew up in the northeast, where snow squalls sweep across Lake Ontario and cede to blue skies, where 85-degree summer days change to a biting rain at a moment’s notice. The folksy phrase around town was, “If you don’t like the weather, just wait a minute.”

Only nine days ago I wrote in the Slott Report about rolling over required minimum distributions (RMDs). Since the “Coronavirus Aid, Relief, and Economic Security Act,” (CARES Act) waived 2020 RMDs (and first-time 2019 RMDs not withdrawn by April 1), my article addressed how many of these RMDs, if already taken, can now be rolled over – as long as the account owner follows the normal rollover rules. For example, the distribution must be received within 60 days to be eligible for rollover, and there is only one IRA-to-IRA rollover allowed per year.

I closed my April 6th article with the following: “Be sure that all rules are followed before haphazardly rolling over an RMD. Yes, these are crazy times, but they are also fluid times. Changes come quickly. Further guidance from the IRS could potentially expand RMD rollover capabilities. As of this writing, RMDs that meet the standard rollover requirements can be rolled back to where they originated or to another qualified account.”

Well, “further guidance” has presented itself like a pop-up thunderstorm. Late last week the IRS released Notice 2020-23. Caught in this swirling vortex of tax filing deadline extensions and postponements was one particularly inconspicuous item. While this little section was not the primary target of the Notice, it was captured in the wind, nevertheless. Based on Notice 2020-23, if an RMD was/is taken between February 1 and May 15, and if that RMD is rolled over by July 15, 2020, then the 60-day rollover rule is waived. RMDs taken in January do not qualify for this relief, nor do any RMDs taken after May 15. In addition, despite this relief, the one-per-year rule still applies to all rollover situations, and inherited IRA RMDs cannot be rolled over.

If these dates seem random and convoluted, then we agree. As the rains come down, the IRS is plugging holes in the dyke as fast as it can. The last time RMDs were waived – back in 2009 – the IRS didn’t grant broad 60-day rollover relief until late in the year. Will they get around to it this year? I certainly hope so. If they do decide to grant additional relief, will they be more direct with their guidance than in Notice 2020-23? That would be much appreciated. Will the one-rollover-per-year rule be addressed? Maybe.

Best bet is to sit tight, inhale deeply, and see what new guidance, regulations and waivers come down the pike. Take your finger off the panic button. There are many months between now and the end of the year and, unfortunately, plenty of more dire issues to concern oneself with. Hopefully, the IRS will assess people’s RMD rollover anxieties and adjust accordingly. “Yes, these are crazy times, but they are also fluid times. Changes come quickly.”

If you don’t like the weather, just wait a minute.

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