The Coronavirus Aid, Relief and Economic Recovery Act (CARES Act), signed into law on March 27, includes several important retirement-related provisions. Because some of these provisions are confusing, several misconceptions about the new law have arisen. In this edition of the Slott Report, we will attempt to set the record straight.Misconception #1: Everyone is eligible for a CRD. The CARES Act allows individuals to withdraw up to $100,000 of IRA and company plan funds during 2020 and receive special tax breaks. These withdrawals are called “coronavirus-related distributions” (CRDs). However, not everyone is eligible to take these withdrawals and qualify for the relief. Under current rules, you are eligible only if you are in one of these categories:
As the coronavirus pandemic has raged on, we have seen devasting images of overwhelmed hospitals and long lines of cars at food banks. If you are fortunate enough to have money to spare, you might be thinking about how you can help. One option to consider is a qualified charitable distribution (QCD).QCDs Still Available for 2020In response to the pandemic, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by Congress. Included in this giant relief package was a provision that waives required minimum distributions (RMDs) for 2020 from retirement accounts.
Question:I took 25% of my 2020 required minimum distribution (RMD) from an inherited IRA on March 15, 2020. Can that be “undone” in accordance with the CARES Act and if so, how? Thanks.AudreyAnswer:Hi Audrey,The CARES Act waives RMDs for 2020. The waiver does include inherited IRAs. However, any amounts already taken from an inherited IRA by a nonspouse beneficiary cannot be rolled over. That is because the regular rollover rules still apply, and those rules do not allow a nonspouse beneficiary to do rollovers. If you are a spouse beneficiary, the rules are different.
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the “Coronavirus Aid, Relief, and Economic Security Act,” (CARES Act) waived 2020 RMDs (and first-time 2019 RMDs not withdrawn by April 1), my article addressed how many of these RMDs, if already taken, can now be rolled over - as long as the account owner follows the normal rollover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.
The recently-enacted Coronavirus Aid, Relief, and Economic Security Act (CARES Act) signed by President Trump on March 27, 2020, allows “qualified individuals” to take up to $100,000 of penalty-free IRA and company plan withdrawals during 2020. “Qualified individuals” include those who are (or whose family members are) sickened by the virus or who have virus-related adverse financial consequences.But what if you are lucky enough not to be a “qualified individual,” but still have extraordinary bills to pay? You should always look first to other non-retirement plan savings to pay your expenses. Any IRA or company plan savings you tap into will mean less available funds at retirement. The next source of savings should be your IRAs. IRA withdrawals are easier and faster than company plan distributions.
Question:Hi. What are the rules for QCDs now that required minimum distributions (RMDs) have been cancelled for 2020?Thanks for your help.JerryAnswer:Jerry,Qualified charitable distributions (QCDs) are unaffected by the CARES Act. Even though RMDs are waived for 2020, you can still do a QCD if you otherwise qualify. While QCDs are a popular way to offset the income from an RMD, they are not required to coincide with an RMD. “Voluntary” withdrawals can just as easily be removed from income by a QCD.
On March 27, the massive “Coronavirus Aid, Relief, and Economic Security Act,” or the “CARES Act,” was signed into law. The CARES Act includes a waiver of required minimum distributions (RMDs) for 2020. This waiver applies to company savings plans and IRAs, including both traditional and Roth inherited IRAs.The waiver of RMDs for 2020 has raised many questions. One question that we have been hearing a lot is: What is the effect of the waiver on the “first money out” rule?How the First Money Out Rule WorksThe first money out rule says that the first money you take out of your IRA or plan in a year when you have to take an RMD is considered to be your RMD for the year. An RMD cannot be rolled over or converted.
Like most people’s lives, the retirement world is upside down. This is made evident by a single statement: “Required minimum distributions (RMDs) can be rolled over.”Yes, that is the new normal – at least for this year. RMDs are considered the first money out of an IRA and workplace plan. Typically, these dollars are ineligible to be rolled over to either another plan or IRA. The RMD always had to be taken first. If an RMD was erroneously rolled over, it was an excess contribution and the appropriate fix-it steps had to be followed.But those hard-and-fast rules are no more for 2020. As we have written in the Slott Report, the “Coronavirus Aid, Relief, and Economic Security Act,” or the “CARES Act,” was signed into law on March 27. The Act includes a waiver of RMDs for this year from company savings plans and IRAs. In addition, the CARES Act impacts 2019 RMDs for those who reached age 70 ½ in 2019 and have a required beginning date of April 1, 2020.
Question:The virus pandemic has prompted legislation that has eliminated the requirement for me to take a required minimum distribution (RMD) from my IRA for the year 2020. Am I therefore allowed to do a partial Roth IRA conversion in 2020 without having to take 2020 RMD first?Answer:Yes. The CARES Act RMD waiver for 2020 means you are not required to receive your RMD before doing a Roth IRA conversion in 2020 – or at any time. The same rule applies to any 2020 IRA rollover for anyone who would normally have an RMD due.
The recently-enacted “Coronavirus Aid, Relief, and Economic Security Act,” or CARES Act, includes special tax relief for IRA and company plan withdrawals made in 2020 and for company plan loans.Who gets relief? Both the distribution and plan loan relief apply only to “qualified individuals.” Not everyone meets this definition. The definition includes:· individuals diagnosed with the SARS-CoV-2 or COVID-19 virus by a test approved bythe CDC;· individuals whose spouse or dependent is diagnosed;· individuals who experience “adverse financial consequences” on account of:> being quarantined;> being furloughed or laid off or having work hours reduced;> being unable to work due to lack of child care; or> closing or reducing hours of a business owned or operated by the individual.The law gives the Secretary of the Treasury the authority to expand this definition.
