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Required Minimum Distribution (RMD) Law Changes to the SECURE Act and the CARES Act

The SECURE Act was recently passed effective 1-1-2020 and, since then, there has been a lot of communication regarding the passage of the CARES Act due to Covid19.

Both of these acts affect how RMD’s are to be processed in 2020, 2021 and onward. The following is a clarification as to how the Required Minimum Distributions (RMD’s) will be handled.

SECURE Act:

The RMD age for all participants, including owners, has been increased from 70 ½ to 72.  However, this applies only to participants who attain age 70 ½ after 2019.  Therefore, if the participants turned 70 ½ in 2019 or earlier, they are unaffected and should continue to take their RMD’s.  But if the participants attained age 70 ½ in 2020 or later, they won’t need to start taking RMDs until after attaining age 72. As under prior law, if the participant is still working after attaining age 72, and does not own over 5% of the employer, the participant can postpone taking RMDs until after they have retired.  This will require a plan amendment at a later date.

CARES Act – supersedes SECURE Act for 2020 only:

Suspension of Required Minimum Distributions for Defined Contribution Plans only.  These are 401(a) – Profit Sharing, Money Purchase, 401(k), 403(b) and 457 plans (Defined Benefit plans are still required to process 2020 RMD’s).  All Defined Contribution Plan RMD’s will cease for 2020 – including those for 1st year recipients as well as those that are already receiving RMD’s. 

Any participant who has already taken an RMD in 2020 can roll it back into the Plan or their own IRA within 60 days of taking the distribution. If the individual qualifies for a coronavirusrelated distribution, by satisfying one of the criteria, they would have the three-year period provided under the CARES Act to repay the distribution to the Plan or their IRA.

Please note that a participant can still elect to request an RMD; to do so they should use the regular RMD form.  Please check with your investment firm to determine their procedure regarding automatic recurring RMD’s.

It is uncertain at this time if the suspension of RMD’s for 2020 will require a plan amendment.

At this time, RMD’s are scheduled to begin again in 2021.

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