The CARES Act, signed into law in late March, waives the 2020 required minimum distribution (RMD) for IRAs and defined contribution plans, like 401(k)s and 403(b)s. This provides owners of these products flexibility and prevents them from having to draw down their plans while facing COVID-19-related market volatility.
The IRS recently issued a notice (Notice 2020-51) clarifying the situation for plan holders who may have taken 2020 RMDs before the waiver went into effect or before they learned about it.
Normally, a plan owner who takes an RMD may roll it back into the retirement plan or into an IRA only if they do so within 60 days of the distribution. The rules typically prohibit plan owners who take equal periodic payments that count toward an RMD from rolling those back into the retirement plan or an IRA The rules also prohibit beneficiaries of inherited IRAs from rolling RMDs back into the retirement plan or into different IRAs.
The IRS notice changes those rules and allows plan owners and beneficiaries of inherited IRAs who have taken full or partial 2020 RMDs to roll those distributions back into the plan from which they were distributed, as long as they do so by Aug. 31, 2020. The notice allows this type of rollover even if the plan holder has rolled a different distribution into an IRA within the past 12 months, even though more than one rollover is typically prohibited during that time period.