CARES Act Retirement Plan Considerations and Benefits

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As part of the federal economic response to the COVID-19 crisis, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was put in place. Below are some provisions of the Act that may impact an individual’s retirement and tax planning.

RMD requirements suspended for 2020

The act provides that the required minimum distribution requirements (RMDs) do not apply for the calendar year 2020. This suspension also includes inherited IRAs.

Tax treatment for coronavirus-related retirement account withdrawals

The CARES Act provides that the 10% early withdrawal penalty for those younger than 59 1/12 does not apply to any coronavirus-related distribution up to $100,000. The taxes owed on the withdrawal can be spread out over three years, or, the withdrawal can be rolled over back into the account over three years to avoid taxes altogether. A qualified individual is anyone who has been diagnosed with the virus, whose spouse or dependent has been diagnosed, or has experienced specific adverse financial consequences as a result of the virus.

Rollovers of RMDs previously taken in 2020

The act also provides that anyone that has taken all or a portion of their RMD during 2020 is eligible for a rollover of those amounts under the 60-day rollover rules.

Qualified Charitable Distributions are not affected while there are no required distributions to offset for 2020. Qualified Charitable Distributions are still permitted.

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