The Federal Government’s massive COVID-19 stimulus package covers many areas of relief for businesses and individuals. Below is a summary of how this recent legislation may affect your tax-deferred retirement accounts and withdrawals from those accounts including RMD’s.
Relief for Retirement Accounts
Buying time: deadline for filing the following has been extended to July 15, 2020:
- Tax return filing date (IRS Notice 2020-18)
- IRA and Roth IRA contributions for 2019
- HSA contributions
- Archer Medical Savings Accounts contributions
- Coverdell Education Savings Account contributions
CARES Act Relief: Here are 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 RDMs from plan, IRA or 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
- There must not have been an IRA-to-IRA or Rother IRA to Roth IRA rollover in the 12 months preceding the receipt of the 2020 RMD
- Non-spouse beneficiaries cannot undo RMDs already taken
Relief for individuals
- Relief is available to individuals if they, a spouse or dependents are diagnosed with COVID-19 and
- Experience adverse financial consequences from being quarantined, furloughed, laid off, reduced work hours, unable to work due to lack of childcare, closing or reducing hours of a business owned or operated by the individuals, or “other factors” to be determined by the Treasury
10% early distribution penalty
- This 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 591/2 (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 from $50,000 to the lesser of $100,000 (reduced by other outstanding loans) or 100% of account balance
- This relief applies to loans taken within 180 days from the bill’s date of enactment
- Any loan repayments normally due between date of enactment and December 31,2020 could be suspended for one year
- IRAs do not allow loans