Included in the massive CARE bill are several relief provisions for retirement accounts. The one that will affect most retirees is the waiver of RMDs for 2020.

This will be a huge help because 2020 RMDs would generally be based on the substantially higher account values on Dec. 31, 2019. If not for this relief, IRA owners and retirement plan beneficiaries would be forced to pay tax on a much higher percentage of their account balance. Eliminating the RMD for 2020 can help clients reduce their 2020 tax bill. However, this won’t help those clients who need the funds and must take withdrawals anyhow.

The RMD waiver also applies to 2019 RMDs that are normally due by April 1. In another bit of positive news, the waiver applies to IRA owners who turned 70 ½ in 2019. The Secure Act had increased the RMD age to 72 for those who turn 70 ½ in 2020 or later. Those who turned age 70 ½ in 2019 were still required to take their first RMD by April 1, 2020. Not anymore.

When clients begin taking RMDs, they have an option of taking all or part of the first-year distribution in the year they turned 70 ½ (under pre-Secure Act rules) or deferring any part of that RMD until April 1 of the following year. If they wait until the following year, they must take their first two RMDs in the following year, resulting in a bunching of RMD income in the same year and an increased tax bill.

An IRA owner or beneficiary who has already received an RMD in 2020 may be apply to repay the distribution based on specific requirements and limitations as defined by the CARES act.

The Cares Act provisions apply to most retirement plan, including traditional IRAs, SEP IRAs, SIMPLE IRAs, 401K plans, 403B plans, 457B plans, profit sharing plans and other defined contribution plans.