How the CARES Act impacts your 2020 RMDs

Smiling couple sits at kitchen table

Key Points

  • Individuals who took a 2020 RMD may repay the distribution by August 31, 2020 but certain conditions apply.
  • Required minimum distributions (RMDs) are waived for most retirement accounts this year.
  • Your advisor is committed to helping you navigate the tax and estate planning aspects with other professionals in these areas.

The CARES Act stimulus package has suspended 2020 RMDs across retirement accounts, including 401(k), IRA, 403(b) and 457(b) accounts.

To help you navigate the tax and estate planning aspects of the change, we've compiled answers to the most frequently asked questions. These answers, along with our personalized advice, will help you make decisions based on your financial situation and goals.


What are the criteria to waive RMDs this year?

The RMD waiver applies to everyone with a 401(k), IRA, 403(b) or 457(b) account. Defined benefit pension plans are not eligible.


I've already taken my RMD for 2020. What can I do?

The IRS has announced rollover relief for anyone who already took required minimum distributions (RMDs) in 2020 from certain retirement accounts. You now have the opportunity to roll those funds back into a retirement account as long as you do so by August 31, 2020.

The guidance also allows for RMDs from inherited IRAs to be rolled back into the distributing inherited IRA by the August deadline.


Is there a special procedure to roll over the amount that would have been my RMD?

You only need to indicate that the payment is a rollover. There is no special coding for a rollover of an amount that would have been an RMD.


I opted to have federal and/or state taxes withheld from my RMDs. Can I roll the tax withholding back in?

Amounts withheld cannot be reversed. However, you can use your own funds to roll over the equivalent amount of taxes withheld. You would then claim that amount when you file your 2020 tax return next year. The full amount of the distribution, including the tax withholding, must be rolled over to avoid taxes.


I am eligible for a COVID-related distribution (CRD). Can I choose to treat a distribution that would have been an RMD as a CRD?

New guidance from the IRS permits periodic payments and distributions that would have previously been RMDs before the enactment of the CARES Act to be treated as CRDs if the individual is eligible to take a CRD.

If you received or will receive these distributions from an eligible retirement plan on or after January 1, 2020 and on or before December 30, 2020, then you are permitted to treat them as CRDs and include the income ratably over three years. You also have the option of returning the funds to an eligible retirement plan within three years. Contact us for more details about this provision or for information on whether you qualify for a CRD.


Do I have to roll the funds back into the same plan the RMD came from?

If the RMD came from a 401(k) plan, then you can roll it back into that plan if the plan accepts. You can also roll the RMD back to an IRA.

If the RMD came from an IRA, you will generally need to roll the RMD back to the same IRA that distributed it to you. Different rules apply if you are able to treat the RMD as a COVID-Related Distribution (CRD) or if you only need to return one RMD payment and have not had an indirect IRA rollover in the last 12 months.


We're here to help

Your Ameriprise advisor can help you understand what the CARES Act means for you and provide personalized advice to adjust your retirement income plans.