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Stimulus Plan Information

$2 Trillion Stimulus Plan Changes For Corporate Plans, Ira’s, Roth’s

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
Source: Ed Slott – Financial Planning Online, March 27th, 2020.
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