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  • Writer's pictureMatthew Slaton

CARES Act Relief and Retirement Changes for 2020

With the CARES Act came changes to how and when you can fund and/or withdraw funds from your qualified retirement accounts. Let's take a quick look.

Relief for Retirement Accounts

Deadlines for the following have been extended to July 15, 2020:

  • Tax return filing date (IRS Notice 2020-18)

  • IRA and Rith IRA contributions for 2019

  • HSA contributions

  • Archer Medical Savings Accounts contributions

  • Coverdell Education Savings Account contributions

CARES Act Relief

RMDs Waived for 2020:

  • 2019 RMDs due by April 1, 2020 (if delayed to January 1, 2020 or later)

  • 2020 RMDs from company plans and IRAs

  • 2020 RMDs for plan, IRA and Roth IRA beneficiaries

RMDs taken this year can be undone if they are eligible to be rolled over. To be eligible:

  • Must be within 60 days.

  • Non-spouse beneficiaries cannot undo RMDs already taken.

  • There must not have been an IRA-to-IRA or Roth IRA-to-Roth IRA rollover in the 12 months preceding receipt of the 2020 RMD.

Planning option: If the distribution is still within the 60 days, but there was an IRA-to-IRA rollover within the preceding 12 months, then a Roth conversion is possible. (Roth conversions don’t count for the once-per-year rule.)

Voluntary distribution options: RMDs are “minimums” only:

  • Roth conversions

  • QCDs (qualified charitable distributions) The QCD age is still 70 ½, even though the SECURE Act raised the RMD age to 72.

Coronavirus-Related Distributions (CRDs)

CRDs are any distributions from a company plan or IRA made anytime during 2020 to affected individuals.

Who are affected individuals?

  • Those diagnosed with the virus.

  • Those whose spouse or dependents are diagnosed.

  • Those who experience adverse financial consequences as a result of:

  1. Being quarantined,

  2. Being furloughed or laid off, or having work hours reduced due to the virus,

  3. Being unable to work due to lack of childcare,

  4. Closing or reducing hours of a business owned or operated by the individual due to the virus, or

  5. “Other factors” to be determined by the Secretary of the Treasury

Retirement relief available:

  • The 10% penalty is waived on up to $100,000 of 2020 distributions from IRAs and company plans (aggregated) for coronavirus-related distributions.

  • The tax would be due but could be spread evenly over three years, and the funds could be repaid over the three-year period.

  • Affected individuals who over age 59 ½ (not subject to the 10% penalty) can still take advantage of the three-year income tax deferral and payback.

Plan Loan Relief

  • For affected individuals, the maximum amount of plan loans is increased to the lesser of $100,000 (reduced by other outstanding loans) or 100% of the account balance. [Normally, the lesser of $50,000 (reduced by other loans) or 50% of the account balance.]

  • This relief applies to loans taken by September 23, 2020.

  • Any loan repayments normally due between March 27, 2020 and December 31, 2020 could be suspended for one year.

  • Loans are not allowed from IRAs.

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