At Private Capital Group, our sole purpose is to help create financial peace of mind for you, our valued clients. We know that economic, social, and medical unrest may still lie ahead, but we are confident that Private Capital Group strives to continue to guide you through all your financial needs.
Due to a combination of the SECURE Act passed in 2019 and the CARES Act passed a few months ago, Americans may find it difficult to navigate the extremely fluid situation regarding tax and retirement laws. When it comes to Required Minimum Distributions (RMDs) and IRA rollovers, the SECURE Act was meant to create more permanent changes in legislation, while the CARES Act intends to provide temporary relief for most Americans, especially retirees. We believe that it is important to discuss some recent legislative changes regarding Required Minimum Distributions. As of June 23, 2020, the Internal Revenue Service has released Notice 2020-51, which mainly allows for any RMD already taken in 2020 to be rolled back into a retirement account until August 31, 2020. In addition, the IRS states that this repayment is not subject to the one IRA to IRA rollover per 12-month period limitation.
Some may ask, “What if I already took an RMD in 2020?” As you aren’t required to take an RMD this year due to the CARES Act, the simple answer to this is that if you took an RMD earlier this year, you may return the RMD through a few different avenues. We have listed a few possibilities below.
Recent RMD Changes:
1) Do a Rollover: You may roll money from one retirement account to another within 60 days. Since no RMDs are required this calendar year due to the CARES Act, you are permitted to roll over that distribution. You may only do this rollover, however, if you have not passed the 60-day timeframe from when you took your RMD.
2) What if I inherited a 401(k) or IRA and took an RMD this year? Typically, non-spousal beneficiaries may never return an RMD, however, this year the IRS has made an exception for these distributions as well. You may return the RMD back to the account in which it came from, or another tax-deferred account.
3) What if I took an RMD in January? The new relief from the IRS allows everyone to return RMDs taken in 2020, as long they return by August 31, 2020. The new IRS notice also allows this for account owners who had already rolled over funds from one IRA to another within the past 365 days. This notice also covers beneficiaries, including spouses and children.
4) Other important information:
Limits on 401(k) loans have been raised and the rules on distributions from retirement accounts have been loosened. People affected by COVID-19 can withdraw up to $100,000 without the 10% penalty that typically applies before the age of 59½. The CRD, or Coronavirus-Related Distribution, temporarily allows an individual to take a distribution from a retirement account and avoid the 10% penalty listed above, as long as the spouse or dependent is diagnosed with COVID-19 or suffers financially from COVID related circumstances. If the owner repays the distribution within 3 years, the funds may go back into the retirement account as a tax-free rollover.
Private Capital Group has been monitoring this ongoing situation. As we keep pace with the new legislation provided by the IRS and other government entities, we will continue to strive to provide you with the best possible service, dedication, and expertise in order to maintain your financial peace of mind. If you need further clarification on the topics above, please speak to your financial advisor, and we strive to guide you through the process.
Thank you for your continued trust in Private Capital Group. We are looking forward to seeing and hearing from you all hopefully very soon!