Broker Check


| April 23, 2020
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On March 27, 2020, President Trump signed into law the massive Coronavirus Aid, Relief, and Economic Security (CARES) Act. This legislation includes a waiver of required minimum distributions (RMDs) for 2020; it applies to company savings plans and IRAs, including both traditional and Roth inherited IRAs.

An RMD waiver is a huge help for clients who would have had to take a 2020 RMD based on much higher account values at December 31, 2019. Now, clients can sit out a year and avoid the tax bill on their 2020 RMDs, if they wish.

The CARES Act impacts 2019 RMDs having a required beginning date of April 1, 2020. Any 2019 RMD amount remaining and not withdrawn by January 1, 2020 is waived.

Another provision of the CARES Act waives the 10% early distribution penalty on up to $100,000 of 2020 distributions from IRAs and plans for affected individuals. The tax would be due but could be spread evenly over 3 years, and the funds could be repaid during those 3 years.

The new law also affects company plan loans taken by affected individuals. First, the law increases the maximum amount of plan loans to the lesser of $100,000 (reduced by other outstanding loans) or 100% of the account balance. (The usual limit is the lesser of $50,000, reduced by other outstanding loans, or 50% of the account balance.) This rule applies to loans taken within 180 days from the bill’s date of enactment.

Second, any loan repayments normally due between date of enactment and December 31, 2020 could be suspended for one year.

In regard to the Plan withdrawals and loan relief: The CARES Act provides tax relief for retirement plan and IRA “:coronavirus-related distributions” taken by individuals on or after January 1, 2020 and before December 31, 2020.  What is the definition of a coronavirus-related distribution?  It is a distribution made to an individual:

  • Who is diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention,
  • Whose spouse or dependent (as defined in section 152 of the Internal Revenue Code of 1986) is diagnosed with such virus or disease by such a test, or
  • Who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury (or the Secretary’s delegate).

As stated, there is a lot to be aware of and it can be confusing.  We would advise you to speak with your tax or legal advisor about how these rules and regulations will affect you. 

For additional information, please review the following attachment:

CARES Act Highlights

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