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Frequent Contributor

Re: RMD requirement suspended


@outandabout wrote:

Still vague to me. What about one like myself that takes RMDs monthly, can I take less than the required for the remainder of the year with penalty?


Yes, you can suspend the remainder of monthly RMDs.

YBB
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Frequent Contributor

Re: RMD requirement suspended

Thanks, yogi

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Frequent Contributor

Re: RMD requirement suspended


@outandabout wrote:

Still vague to me. What about one like myself that takes RMDs monthly, can I take less than the required for the remainder of the year with penalty?


You may, if you wish, notify your IRA custodian to cease all RMD withdrawals for the rest of the year....but unless Congress continues this RMD Holiday, you'll need to remember to restart the monthly RMD payments from your TIRA January 2021. In addition, any withdrawals that were made since January 31 (if my 60 day counting is correct) may be rolled back into the TIRA or another TIRA you might own, but you may do this form of rollover only once in the 12 month rollover period that begins with the day  you received the withdrawal.

BruceM

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Explorer ○

Re: RMD requirement suspended

Hello Bruce M.  The full text of the CARES Act is now online and my cursory review does not show the RMD suspension language.  Do you happen to have a citation to the specific section of the Act itself? 

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Frequent Contributor

Re: RMD requirement suspended


@outandabout wrote:

Still vague to me. What about one like myself that takes RMDs monthly, can I take less than the required for the remainder of the year with penalty?


I have three more RMD from a retirement that will automatically paid to me later this year. I can roll over each one back to the plan because the 1 rollover a year rule on applies to transfers between IRAs.

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Frequent Contributor

Re: RMD requirement suspended


@Husker wrote:

Hello Bruce M.  The full text of the CARES Act is now online and my cursory review does not show the RMD suspension language.  Do you happen to have a citation to the specific section of the Act itself? 


2203

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Frequent Contributor

Re: RMD requirement suspended

Michael Kitces cites section 2203--e.g.,

Required Minimum Distributions Are Waived In 2020

Section 2203 of the CARES Act amends IRC Section 401(a)(9) to suspend Required Minimum Distributions (RMDs) during 2020. The relief provided by this provision is broad and applies to Traditional IRAs, SEP IRAs, and SIMPLE IRAs, as well as 401(k), 403(b), and Governmental 457(b) plans. Furthermore, the relief applies to both retirement account owners, themselves, as well as to beneficiaries taking stretch distributions.

In one somewhat surprising twist, the CARES Act not only eliminates RMDs for 2020 but any RMD that otherwise needed to be taken in 2020. More specifically, individuals who turned 70 ½ in 2019, but did not take their first RMD in 2019 (and thus, would have normally been required to take such a distribution by April 1st, 2020,  as well as a second RMD for 2020 by the end of 2020) do not have to take either their 2019 RMD or their 2020 RMD! Thus, these procrastinators get to escape two RMDs instead of just one!

Bob

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Explorer ○

Re: RMD requirement suspended

Thank you Bob!

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Explorer ○○

Re: RMD requirement suspended

A relative received her annual RMD from her state sponsored 401k on Monday, March 30. I told her that CARES allows her to return it within 60 days. But when she called her 401k plan administrator's office, she was told "No, we don't do that. You cannot return it."

I just emailed her articles from "Forbes" and "Kiplinger" that support this and suggested that she call her plan again and ask to speak to a supervisor.  

Any suggestions on what else she can do if she still gets this answer? Thank  you.

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Participant ○○

Re: RMD requirement suspended

 

For tax smoothing, a person might also continue withdrawals

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Employee
Employee

Re: RMD requirement suspended


@Retired1809 wrote:

A relative received her annual RMD from her state sponsored 401k on Monday, March 30. I told her that CARES allows her to return it within 60 days. But when she called her 401k plan administrator's office, she was told "No, we don't do that. You cannot return it."

I just emailed her articles from "Forbes" and "Kiplinger" that support this and suggested that she call her plan again and ask to speak to a supervisor.  

Any suggestions on what else she can do if she still gets this answer? Thank  you.



Mention the correct terminology as they might not understand "return it within 60 days.".  Say something like: 

"CARES Act includes a provision that says we don't have an RMD this year. Which means if you did take that distribution, you can put now it back within 60 days.  The putting back of the money into the 401k or IRA plans is called one-per-year rollover rule.

one-per-year rollover rule allows a person to roll back or into another account (ie 401k rolled over to IRA, or the 401k 2020 distribution rolled back into the 401k account)"

Boris

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Frequent Contributor

Re: RMD requirement suspended

Boris wrote:

"one-per-year rollover rule."

Thank you, Boris.  I was unfamiliar with the term.

Bob

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Frequent Contributor

Re: RMD requirement suspended

Plan administrator is following plan rules that RMD cannot be Rolled over which will have to be changed. Haven’t looked at it but there may be a provision in cares act that would allow a rollover to an IRA.

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Frequent Contributor

Re: RMD requirement suspended


@borosp wrote:

@Retired1809 wrote:

A relative received her annual RMD from her state sponsored 401k on Monday, March 30. I told her that CARES allows her to return it within 60 days. But when she called her 401k plan administrator's office, she was told "No, we don't do that. You cannot return it."

I just emailed her articles from "Forbes" and "Kiplinger" that support this and suggested that she call her plan again and ask to speak to a supervisor.  

Any suggestions on what else she can do if she still gets this answer? Thank  you.



Mention the correct terminology as they might not understand "return it within 60 days.".  Say something like: 

"CARES Act includes a provision that says we don't have an RMD this year. Which means if you did take that distribution, you can put now it back within 60 days.  The putting back of the money into the 401k or IRA plans is called one-per-year rollover rule.

one-per-year rollover rule allows a person to roll back or into another account (ie 401k rolled over to IRA, or the 401k 2020 distribution rolled back into the 401k account)"

Boris


Limitation of 1 rollover every 12 months only applies where IRA distribution is rolled over to another IRA. It does not apply to rollovers between qualified plans or 403b plans and IRAs. There is no limit to the number of direct transfers of IRAs from one IRA custodian to another IRA custodian. Taxpayer can take unlimited rollovers between 401k or 403b plans and an IRA every year.

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Explorer ○○

Re: RMD requirement suspended

Thank you, Boris. Excellent suggestion.

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Frequent Contributor

Re: RMD requirement suspended

Retired1809

The following is from the Kitces article on the provision of the CARES Act regarding 401(k) RMDs and returning them.

For IRA, 401(k), and other retirement account owners, this may be possible in two different ways. In a best-case scenario, the ‘RMD’ distribution will have taken place within the last 60 days, and the distribution won’t be prevented from being rolled over due to the once-per-year rollover rule (either because it came from a plan, is going to a plan, or because no IRA-to-IRA rollover has been made within the past 365 days). In such instances, an individual can simply write a check, or otherwise transfer an amount equal to the ‘RMD’ back into a retirement account before the end of the 60-day rollover window.

What likely has happened is the state has not yet updated the rollback rule for 2020 under CARES and the front line phone-answerers have been instructed accordingly.

I don't know if your relative could simply roll it into an IRA and call it a return of the RMD, as this would create a potential problem on both ends: the 401(k) plan would treat it as a normal distribution on the 1099-R while the IRA custodian would likely call it an annual contribution on the form 5498.

His/her best bet is to stay on the plan administrator about it, assuming of course the intent is to return the RMD to the plan.

BruceM

 

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Follower ○○

Re: RMD requirement suspended

Charitable contributions.  I have already had several checks sent from my broker directly to local charities, who need the money NOW.  With no RMD, how will the IRS treat these donations?

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Frequent Contributor

Re: RMD requirement suspended


@BS17LC09 wrote:

Charitable contributions.  I have already had several checks sent from my broker directly to local charities, who need the money NOW.  With no RMD, how will the IRS treat these donations?


They will be non taxable because charitable IRAs apply to up to $100k of TIRA distributions by anyone 70 1/2. The amount is included as an RMD but is not required to be an RMD.

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Frequent Contributor

Re: RMD requirement suspended


@BS17LC09 wrote:

Charitable contributions.  I have already had several checks sent from my broker directly to local charities, who need the money NOW.  With no RMD, how will the IRS treat these donations?


QCD and RMDs are different things. But QCD can be RMD.

Up to $100K in QCD doesn't flow through income but rules must be followed strictly.   https://www.investopedia.com/taxes/can-i-use-money-my-ira-donate-charity/

YBB
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Follower ○○

Re: RMD requirement suspended

Update for Roth Conversions: When I posted the initial comments suggesting using the RMD waiver as a bonus opportunity to make a Roth conversion instead of the normal RMD, I was unaware of a critical element of the CARES Act payment.

For tax purposes the payments will be structured as an advance against a tax credit to be incorporated into 2020 tax filing. So, although the issuance of checks will be based upon either 2018 or 2019 tax returns on file at the time of issuance of the checks, your 2020 income could result in a claw-back of the payment when 2020 taxes are filed. For example, if a couple had a 2018 AGI less than $150,000, they would receive $2400. But, if their 2020 AGI exceeded $200,000, the intended tax credit drops to zero. However, my source on this was not clear whether repayment would be required or not ( https://www.schiffhardin.com/insights/publications/2020/cares-act-key-tax-provisions-offering-relief... ). So, watch for any clarifications of the details of the payment and potential claw-back provisions related to 2020 tax return. The only sure path at this time is to try to keep 2020 AGI under $150,000 to protect your CARES payment.

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