On June 23, 2020, the IRS issued Notice 2020-51 (“Notice”) which provides guidance regarding the repayment of required minimum distributions (“RMDs”) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Under the CARES Act certain 2020 RMDs already taken can be repaid to a retirement account as a rollover. Generally, RMDs are not eligible for rollover. However, under the CARES Act, an RMD taken in 2020 is no longer required, it is voluntary and therefore not technically an RMD.
The Notice provides the following:
- 2020 RMDs taken on or after January 1, 2020, are rollover eligible.
- An IRA owner or beneficiary is permitted to repay distributions that would have been a 2020 RMD back into the distributing IRA.
- The repayment of the waived RMD can occur more than 60 days after the original distribution date provided it is made no later than August 31, 2020.
- The repayment will be treated as a rollover, except that neither the “1 rollover per year rule” nor the limitation on non-spousal beneficiary rollovers apply.
Operational impact:
- Process repayments of 2020 RMDs as rollover contributions (ROC).
- For repayments of 2020 RMDs to IRA beneficiary distribution accounts (BDAs), clients have the following options:
- Send the check or wire with instructions to repay the 2020 RMD into the BDA as a rollover (ROC).
- Submit a Service Request to process a journal from a non-retirement account or an EFT contribution to the BDA as a rollover (ROC).
- Use Remote Check Deposit to deposit the rollover. Note: For IRA-BDAs, the only option is to deposit it as a direct rollover (DRC). The DRC will be reported correctly on a 5498 form but will appear as a direct rollover on a statement.
- Rollovers of 2020 RMDs must be received by National Financial Services, LLC (NFS) no later than August 31, 2020.
In addition, the IRS issued supplemental guidance that impacts both IRA and employer sponsored plans that permit coronavirus related distributions to eligible employees. An additional update summarizing the guidance will follow shortly.
For more information on the IRS guidance relative to the waiver of 2020 RMDs, please refer to IR-2020-51
TC115675(0720)1