Retirement Account COVID-19 Relief

By Steven C. Wagner, JD, CPA

In general, the CARES Act provides for expanded distribution options and favorable tax treatment for up to $100,000 of “coronavirus-related distributions,” the ability to skip your Required Minimum Distribution (“RMD”) for 2020, repayment options, and potential changes to loans from plans.

Qualified individuals affected by COVID-19 may be able to withdraw up to $100,000 from their eligible retirement plans, including IRAs, between January 1 to December 30, 2020. These coronavirus-related distributions are not subject to the 10% additional tax that generally applies to distributions made before reaching the age of 59 1/2, but they are still subject to regular tax.

However, taxpayers can include coronavirus-related distributions as income on tax returns over a three-year period. In addition, it may be possible to repay all or part of the distribution to a plan or IRA within three years.

Also, for 2020, taxpayers can skip their RMDs from certain retirement plans. In general, these include a 401(k) or 403(b) plan, as well as an IRA. People who already took a RMD from certain retirement accounts in 2020 can roll those funds back into a retirement account. There is a 60-day rollover period to put the funds back into a retirement account (previously the 60-day period was extended to August 31, 2020).

In addition, some retirement plans that allow for loans may have relaxed rules on plan loan amounts and repayment terms. Please discuss with your employer.

Finally, please discuss these items with your tax and/or financial advisor, as with any rules requirements and exceptions apply.

About The Author

Steven C. Wagner is a Partner at the legal services firm of Fletcher Struse Fickbohm & Wagner PLC. His areas of expertise are in estate planning, trust administration, and estate, trust, gift and generation-skipping transfer taxation. Steve became a certified public accountant in December 2002. Then Steve went to Rutgers School of Law in Camden New Jersey and became a member of the state bar of Arizona in December 2005. Steve is a member of the Southern Arizona Estate Planning Council and Tucson Tax Study Group. In addition, Steve is on the board for the Rialto Theatre Foundation and on the Professional Advisory Committee for the Community Foundation for Southern Arizona.