72T and CARES Distribution
A client had to take a additional partial withdraw from their IRA account because of income decline due to Corona Virus. This IRA had a 72t withdraw in effect. Question for the ongoing 72t how should that be calculated? Is it based on the value of the IRA at the time the 72t was started or should it be recalculated based on the reduced amount. Also to confirm that if the client is still under age 59 1/2 the five year clock continues or restarts with the excess withdraw?
Permalink Submitted by Alan - IRA critic on Tue, 2020-07-21 18:57
Per Notice 2020-50, Sec 4, (H) a CRD will not be treated as a modification of the 72t plan. Therefore, the plan continues just as it would have if the CRD had not been distributed. Most plans use a fixed dollar calculation done one time at plan inception, but if the RMD method is being used, the following year’s distribution would be calculated using the actual year end value of the IRA. The 5 year period does not change for determining the plan modification (ending) date.