The CARES Act was signed into law on March 27, 2020. While most of the Act is focused on economic stimulus, below is information on how the Act eases requirements for RETIREMENT AND ANNUITY clients.
WAIVER OF 2020 RMD’S All required minimum distributions (RMDs) are waived for the 2020 tax year. This waiver includes 2020 RMDs from inherited IRAs. For clients who turned 70.5 in 2019, the waiver also includes RMDs that were due by April 1, 2020 and not taken in 2019.
Clients receiving RMDs through systematic payments will receive their 2020 RMD as planned, unless they request otherwise. They will receive a letter with this information.
If your clients already received their RMD for 2020, they may return it to us by April 30, and we will reverse the withdrawal. However, unless the IRS announces a more generous rule in the future, we cannot accept back an RMD from an inherited IRA.
SPECIAL TREATMENT FOR CORONAVIRUS-RELATED DISTRIBUTIONS The Act includes the following provisions for coronavirus-related distributions taken from an employer plan or IRA.
10% tax penalty for taking a distribution before age 59.5 is waived.
20% mandatory federal income tax withholding for employer plans is waived.
Income tax on the distribution may be paid over a three-year period. Note the full distribution amount will be reported on 1099s for 2020.
Distributions may be rolled back into the employer plan or IRA within three years. Please note, the annuity contract’s purchase payment requirements/restrictions will apply.
Distributions are limited to an aggregate amount of $100,000.
Employer plans may be amended to add an exception to the distribution restrictions to allow such withdrawals.
Any early withdrawal charges and market value adjustments will apply.
To qualify as a coronavirus-related distribution, the distribution must be qualified funds from an employer plan or IRA to a person who: is diagnosed with the virus, has a spouse or dependent diagnosed with the virus or has lost income on account of the virus.
The provisions do not apply to non-qualified contracts or inherited non-qualified contracts.
We are here to support you during these unprecedented and ever-changing times. Thank you for choosing 1 Source Financial Solutions!