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SS+D COVID-19 Response Team: 2020 Required Minimum Distributions (RMDS) Waived by Cares Act March 30, 2020

March 31, 2020 | Sebaly Shillito + Dyer

The CARES Act provides relief to owners of the most common types of retirements accounts (e.g., IRAs, 401(k)s, etc.) by waiving all Required Minimum Distribution (RMD) rules for 2020.

This is particularly valuable to investors because of the recent market downturn. RMDs are calculated based on the account balance as of the immediately preceding December 31. Forcing RMDs in 2020 based on Dec. 31, 2019 account balances could lead to a disproportionately high RMD relative to today’s account balance, which would force a taxable distribution disproportionately large compared to the current account balance.

If an RMD has already been received during 2020, then the participant may roll it over and defer paying taxes, including rolling back into the plan.

You do not need to take any special steps to qualify or apply for the moratorium on the RMD requirement. The new rule applies to all participants in retirement plans and owners of IRAs. Of course, if you want to take distributions, there is nothing stopping you. We expect the CARES Act’s suspension of RMDs will apply to beneficiaries of inherited IRAs as well, but we are still waiting on guidance.

The SS+D COVID-19 Response Team was formed to provide clients, colleagues, and friends of the Firm updates for the foreseeable future on COVID-19 issues facing businesses, executives, and employees. Please let us know if there are any items/issues you would like for us to track or summarize.

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Sebaly Shillito + Dyer