RMD Rollovers | Ed Slott and Company, LLC

RMD Rollovers

I know Notice 2020-51 allows distributions (including January distributions) that would have been RMDs had it not been for CARES Act to be rolled over by August 31st and qualify; however...
1. Do RMDs from qualified plans (non-IRA) have to be returned to the same distributing account to receive the August 31 deadline?
2. Do RMDs from IRAs have to be returned to the same IRA account to receive the August 31 deadline?
3. Is the mention of the SECURE Act meant for plan administrators who mistakenly issued what would have been an RMD had the SECURE Act not passed? In that case, can you argue that a regular January distribution taken in 2020 (when an individual turned 70.5) was intended to be the RMD, and therefore, it can be rolled over now?

  1. No, they may have to be rolled over to an IRA because the distributing plan may not accept roll backs.
  2. No. But such distributions to non spouse IRA beneficiaries can only be rolled back to the distributing account.
  3. Yes. That's why the Secure Act was incorporated into this notice. It would also apply to a deferred 2019 RMD for someone reaching 70.5 in 2019 who did not complete their 2019 RMD in 2019.  Those particular taxpayers avoid both the 2020 RMD and the portion of the 2019 RMD that was deferred to early 2020.

Regarding #2, III.D of Notice 2020-51 only seems to mention repaying the distribution "to the distributing IRA."  Taking that literally and absent any guidance to the contrary, it seems that depositing the money into a different IRA would be treated as a rollover, subject to the 60-day or July 15 rollover deadline and the one-rollover-per-12-months limitation, rather than as a repayment with the August 31 deadline.

Agree. The IRA RMD of an owner must be returned to the same account as well as a beneficiary RMD.  Even if the remaining balance in that account had been transferred to a new custodian, many IRA custodians will leave the account open for a period of time, and that might enable the return of the RMD even to a 0 balance account. However, if the account had been closed the rollback will not be possible except under the more restrictive prior conditions.

With a rollback of one months RMD to the original IRA account already completed for a client who receives their RMD monthly, the new CARES Act changes seem to indicate the client may go back and now rollback all other montly RMD's to the originating IRA account without any issue with one Rollover per year rule at least until August 31st.  Check me on this please.

That is correct. Since the 60 day deadline AND the one rollover per 12 months limits do not apply, client may as well wait until mid August, then roll back as much of the total of these distributions at one time. However, the client needs to shut down the monthly distributions still scheduled for Sept-Dec since client may well not have the chance to roll them back.

 

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