IRS Expands RMD Relief for Retirees

Required minimum distributions (RMDs) from retirement accounts generally kick in once you turn age 72, but early this year, many seniors who are required to take them got a reprieve from Congress.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed in March, suspended RMDs from traditional IRAs as well as 401, 403(b), and 457 plans for 2020. This action will not only help people lower their taxable income, but it also means they won't be forced to sell investments by pulling money out of retirement accounts that have lost value. But some people, including those who took RMDs early in the year, were originally left out of this relief.

No longer: The IRS has expanded the waiver rules to cover those the law overlooked and to give everyone more time to return any 2020 RMDs to their accounts without tax consequences. The waiver extension may give some investment portfolios time to recover before next year's distributions are due.

Here are the details:

  • Early birds who took RMDs in January but want to suspend this year's withdrawals can now restore that money to their account. It will be treated as a tax-free rollover. (Previously, the CARES Act excluded RMDs taken in January from this rollover relief.)

    Additionally, those who already took RMDs this year but now want to waive them have more time to return that money to their account. The previous deadline was July 15, 2020, to return any RMDs taken between Feb. 1 and May 15. Now those who took 2020 RMDs have until Aug. 31, 2020, to return the distributions to their account.
  • RMDs in 2020 are also waived for those taking distributions from an inherited IRA. (Heirs were not included in the waiver before.)
  • Rollovers are normally limited to one every 12 months, but that rule is also waived for those repaying RMDs. This helps retirees who take distributions in monthly installments.

Learn about other extensions from the IRS in Homeowners, Renters, and Taxpayers Get Extended Financial Relief. Also, if you or a family member's employment has been impacted by COVID-19, see our Employment Transition Resources and for more information, please contact your ICMA-RC representative.

Please note: The contents of this publication provided by ICMA-RC is general information regarding your retirement benefits. It is not intended to provide you with or substitute for specific legal, tax, or investment advice. You may want to consult with your legal, tax, or investment adviser to review your own personal situation. Some of the products, services, or funds detailed in this publication may not be available in your plan. This document contains information obtained from outside sources and it references external websites. While we believe this information to be reliable, we cannot guarantee its complete accuracy. In addition, rules and laws can change frequently.

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