The gift for retirees bundled in the CARES Act

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For many advisors with affluent retiree clients, the CARES Act provision that may have the biggest impact is its suspension of RMDs during 2020. The move will have clear implications for tax planning strategies, so it’s incumbent on advisors to get ahead of their clients’ questions with sound strategic recommendations.


Section 2203of the CARES Act provides broad relief to retirement account owners and beneficiaries who would normally be subject to RMDs. However, while the relief is in fact broad, it is not absolute. Accordingly, some retirement account owners continue to be subject to RMDs for 2020.

Section 2203(a) amends IRC Section 401(a)(9), which outlines required distributions from qualified pension, profit-sharing and stock bonus plans by adding a new subparagraph, Section 401(a)(9)(I), to the end of the original section. The added subparagraph includes three subsections, IRC Section 401(a)(9)(I)(i)(I), that effectively suspend RMDs for all defined contribution plan accounts, as well as for IRAs.

As such, 401(a) plans such as money purchase pension plans and 401(k) plans — which are effectively covered by the subsection language — as well as the section’s explicitly referenced 403(a) and 403(b) plans do not have RMDs for 2020.

New IRC Section 401(a)(9)(I)(i)(II) provides the same relief for a “defined contribution plan which is an eligible deferred compensation plan described in section 457(b) but only if such plan is maintained by an employer described in section 457(e)(1)(A).”

In turn, Section 457(e)(1)(A) describes a “state, political subdivision of a state, and any agency or instrumentality of a state or political subdivision of a state.” Thus, participants in governmental 457(b) plans do not have to take RMDs during 2020 either.

Finally, new IRC Section 401(a)(9)(I)(i)(III) eliminates RMDs during 2020 for “an individual retirement plan.” RMDs for IRAs, including SEP and SIMPLE IRA accounts, accordingly are suspended during 2020.

The suspensions are further extended to participants in the Federal Thrift Savings Plan, or TSP. On April 13 the TSP posted an update stating in part, “You do not need to make any withdrawals from your TSP account in 2020 to satisfy an RMD, regardless of your age or employment status.”


For some retirees who were due to begin RMDs, the news gets even better.

Under new IRC Section 401(a)(9)(I)(ii), individuals whose required beginning date fell in 2020 and who did not take their first RMD in 2019, and were waiting until the traditional April 1 deadline, do not have to take either the delayed 2019 RMD or 2020 RMD.

This double-waiver benefit applies to two types of retirees: those who turned 70 ½ in 2019 but did not yet take their 2019 RMD, and some older taxpayers who retired in 2019 but were previously able to delay RMDs due to the still-working exception.

Note that Section 2203 of the CARES Act is largely borrowed from Section 201 of the Worker, Retiree, and Employee Recovery Act, or WRERA, which similarly suspended RMDs for 2009. The latter, however, did not waive the requirement for 2008 first-year RMDs that had not yet been taken.

Example No. 1: Josh is a traditional IRA owner who turned 70 ½ on March 20, 2019. Not wanting to take a distribution from his IRA until absolutely necessary, Josh did not take his first RMD in 2019, but rather planned to do so in early 2020.

Since Josh turned 70 ½ in 2019 — and was, therefore, ineligible for the SECURE Act’s new age-72 start for RMDs — his beginning date was scheduled for April 1, 2020.

However, as a result of the CARES Act’s suspension of RMDs, Josh does not have to take either his first RMD for 2019, which would normally be due by April 1, or his second RMD for 2020, which would normally be due by December 31.

For individuals who choose to continue working beyond the age at which RMDs are generally required, the still-working exception was implemented by Congress to allow them to continue benefiting from the tax deferral offered by their employers’ 401(k) or similar plans, throughout their ongoing employment years. This provision delays an individual’s beginning date to April 1 of the year following the year the employee retires.

Example No. 2: Susan is a 78-year-old engineer who retired on December 1, 2019, and who accumulated her retirement savings within her 401(k). During her career she qualified for the still-working exception, and accordingly was not required to take any RMDs.

However, since Susan retired in 2019 and did not work throughout the entire year, the still-working exception no longer applied, and an RMD popped into existence for 2019. Her RBD therefore was scheduled to be April 1, 2020.

Having earned a full salary for 11 out of 12 months of the year, Susan decided to push off her first RMD until 2020. Now, in light of the CARES Act, that decision would look even better, as the need to take the pushed-off 2019 RMD and her regular 2020 RMD are both eliminated.

Note that the CARES Act only waives 2019 RMDs of individuals who turned 70 ½ in 2019 if they did not take their RMD. However, if such amounts were distributed in 2019, they continue to be treated as an RMD, and thus are not eligible to be rolled over to another retirement account.


The CARES Act provides RMD relief for a broad range of retirement plans, yet there remain certain distributions that must still be taken in 2020 to avoid penalties and/or other tax headaches.

Impact of CARES Act on various RMDs

Meanwhile, other types of distributions are wholly unaffected by the CARES Act’s provisions. These include:

  • RMDs for defined benefit plans: Recall that new IRC Section 401(a)(9)(I)(i)(I) suspends RMDs for 2020 for a “defined contribution plan which is described in this subsection or in section 403(a) or 403(b).” As such, individuals subject to RMDs from defined benefit plans continue to be subject to those obligations. This includes RMDs from traditional pensions as well as cash balance plans.
  • RMDs for non-governmental 457(b) plans: New IRC Section 401(a)(9)(I)(i)(II) eliminated RMDs for 457(b) plans, “but only if such plan is maintained by an employer described in section 457(e)(1)(A).” As such, participants in similar plans maintained by a nonprofit entity organized under IRC Section 501(c) — i.e., a non-governmental 457(b) plan —continue to be subject to RMDs in 2020.
  • Annuitized annuities held In IRA, 401(k), 403(b) and other defined contribution plans: When an IRA or other DC plan is invested in an annuity that is annuitized, tax rules essentially treat the amounts as flipping from the DC to the DB plan rules. And since the CARES Act only suspends RMDs for DC plans, these annuitized distributions need to continue.
  • 72(t) distributions: While it’s fair to think about distributions under a 72(t) schedule as required, they are not under IRC Section 401(a)(9). Rather, 72(t) distributions are taken to comply with the rules of IRC Section 72(t). Note that this is the case regardless of whether the amount of the 72(t) distribution is calculated using the annuitization, amortization or the RMD life expectancy method. All such 72(t) distributions that were otherwise required in 2020 remain so.
  • Qualified charitable distributions: QCDs are unimpacted by the CARES Act. As such, any IRA owner or IRA beneficiary 70 ½ or older can continue to utilize the provision to satisfy charitable intent. Such distributions cannot offset an RMD — given there’s no RMD to offset — but still represent a tax-efficient way to donate entirely pre-tax dollars to charity.

The relief from RMDs provided by the SECURE Act goes beyond the owners of retirement accounts, extending to both designated and non-designated beneficiaries of inherited retirement accounts as well.

Note that the SECURE Act split designated beneficiaries into two separate groups: eligible designated beneficiaries and non-eligible beneficiaries. That change, however, would not be beneficial were a death to occur in 2020. Beneficiaries subject to RMDs in 2020 will, by definition of the rules, have inherited from individuals who died in prior years. Thus, a discussion of the CARES Act’s impact on beneficiary RMDs can only be limited to the old designated and non-designated beneficiary categories.

Designated beneficiaries using the so-called stretch life expectancy method to calculate post-death RMDs do not have to take an RMD in 2020. The same is also true for non-designated beneficiaries — e.g., charities, estates naming a will and certain trusts — inheriting from decedents who passed away on or after their RBD. In which case the non-designated beneficiary is required to distribute the inherited assets over the deceased owner’s remaining single life expectancy.

Notably, when calculating RMDs in 2021, such beneficiaries — i.e., designated and non-designated who inherit from decedents who passed away on or after their beginning date — will act as though the 2020 RMD was taken. When calculating their 2021 RMD, they will subtract two from the factor they used when determining their 2019 RMD.

Example No. 3: Paul is the beneficiary of his mother’s IRA. His mother passed in 2015, and in 2016, when Paul turned 41, he took his first RMD using the corresponding single life expectancy table of 42.7.

Now, four years after taking his first inherited-IRA RMD, Paul was prepared to take another distribution from the inherited IRA account using a factor of 42.7 – 4 = 38.7. Thanks to the CARES Act though, this RMD is no longer necessary.

In 2021, when Paul calculates the RMD for his inherited IRA, he will not use the factor of 38.7. Instead, when calculating his 2021 RMD, he will pretend as though 2020 was just like any other year.

Thus, because 2021 will mark the fifth year after the year in which Paul took his first RMD, he will calculate the amount of the distribution using a factor of 42.7 – 5 = 37.7.

Non-designated beneficiaries who inherited from owners dying before their RBD also get a break under the CARES Act. Such beneficiaries, which include charities, non-see-through trusts and estates, are subject to the five-year rule, which stipulates that all assets in the inherited retirement account be distributed by the end of the fifth calendar year after the year of death.

However, the CARES Act effectively turns this rule into a six-year rule for non-designated beneficiaries. New IRC Section 401(a)(9)(I)(iii)(II) states, “If clause (ii) of subparagraph (B) applies, the 5-year period described in such clause shall be determined without regard to calendar year 2020.”

The following questions will determine if the six-year rule applies:

  • Is the beneficiary non-designated?
  • Did the decedent die before their required beginning date?
  • Did the decedent die between 2015 and 2019?

If the answer to all three of these questions is “Yes,” then the non-designated beneficiary will be subject to what amounts to a six-year rule, as shown in the chart below.

RMD non-designated beneficiary

Accordingly, the retirement account beneficiary may distribute as much or as little as they like from the inherited account during the first five calendar years after the calendar year of death. However, any amounts remaining in the account in the sixth year after death must be distributed prior to the end of the year.


By the time the CARES Act’s relief on RMDs was brought to life, many retirees had already taken what they believed to be their obligated RMD for 2020.

Thus, while the ability to avoid an RMD for 2020 comes as welcome news for many affluent retirees, for others the relief provided by the CARES Act may have come too late for an RMD already taken.

Fortunately, there will be at least some cases in which unwanted RMDs can be fixed — though not without complications, such as the once-per-year rollover rule, which may also limit or eliminate any benefits of the legislation. On the other hand, spousal beneficiaries of inherited retirement accounts may be able to fix unwanted RMDs, even though non-spouse beneficiaries will not.

Participants in employer-sponsored retirement plans or any type of IRA, meanwhile, have a number of different ways in which they can fix unwanted RMDs. These methods include:

Using the 60-day rollover window: The simplest way to fix an unwanted RMD taken from an IRA or employer-sponsored retirement plan is to catch it during the 60-day rollover window.

While RMDs are not eligible for rollover, non-RMD distributions that were thought to be an RMD at the time of distribution are retroactively unrequired by the CARES Act. Thus, such amounts would be eligible for rollover — either back to the same account from which they were distributed, or to another eligible retirement account such as an IRA — because they were not RMDs in the first place.

Working in the recipient’s favor is the fact that the 60-day rollover window doesn’t begin until a taxpayer actually receives their distribution, with Day 1 being the day after receipt.

On the other hand, IRA owners must be mindful of the once-per-year IRA rollover rule, but since this doesn’t apply to distributions from non-IRA–based employer-sponsored retirement plans, any number of distributions meant to satisfy an RMD — and received by a taxpayer within the past 60 days — may be rolled over to an eligible account before the end of the 60-day rollover window.

Using the relief provided by notice 2020-23: On April 9 the IRS issued Notice 2020-23 to provide taxpayers with additional relief from deadlines due to the COVID-19 crisis. For many the marquee moment was the pushback of Q2 2020 estimated tax payments to July 15, 2020. But toward the end of Section A, the IRS cracked open the RMD relief door for a few additional taxpayers by allowing those individuals with distributions outside of the 60-day window, but taken as far back as February 1, 2020, to be rolled over until as late as July 15, 2020.

Interestingly, extending the rollover deadline is covered rather simply in Treasury Regulation § 301.7508A-1(c)(1)(iii), which is not listed in Section A. However, Revenue Procedure 2018-58, which is also referenced, does grant relief for rollover contributions.

As such, in what seems to be an overly complicated way of doing so, IRS Notice 2020-23 extends the rollover deadline for any distributions that would have needed to be completed between April 1, 2020, and July 14, 2020, to July 15, 2020. Distributions taken as far back as February 1, 2020 can consequently be rolled over until as late as July 15, 2020.

Using the coronavirus-related distribution provision of the CARES Act: creates a special distribution that can be used by individuals who have been directly affected by the COVID-19 virus. These distributions can be up to $100,000 and made from IRAs, employer-sponsored retirement plans or a combination of both, and must be made in 2020 by an individual who has been impacted by the coronavirus.

To qualify for such a distribution, a taxpayer, their spouse or a dependent must have tested positive for COVID-19, or they must be experiencing hardship due to being quarantined; furloughed; laid off; unable to work due to a lack of childcare options; having hours reduced; or, for business owners, closing or partially shutting down operations. Additionally, the CARES Act authorizes the IRS to extend relief to others as it sees fit.

Coronavirus-related distributions offer several benefits, but of particular interest to individuals looking to rollover RMDs taken early in 2020 — and thus, outside both the 60-day rollover window as well as the provisions outlined in IRS Notice 2020-23 — is that such distributions may be rolled over to another retirement account for up to three years after the distribution has been received.

Furthermore, unlike most provisions of the CARES Act, the relief provided by coronavirus-related distributions extends back to January 1, 2020 — before the coronavirus was a significant factor in any U.S. location.

It’s possible that at some point the IRS could provide some sort of blanket relief, allowing everyone to use a coronavirus-related distribution in the same manner as the agency extended the tax filing deadline. However, given the extent of the COVID-19 crisis and the corresponding economic impacts, many taxpayers will already be able to have distributions qualify for such status.

Critically, nothing in the CARES Act would prevent an individual from treating an early year RMD as a coronavirus-related distribution if, at any point during 2020, they test positive or qualify due to hardship. And since the CARES Act allows these distributions to be treated retroactively all the way to January 1, 2020, the deadline to roll over that distribution would change from 60 days to three years after it was received.

Example No. 4: Cynthia is a 74-year-old IRA owner who took what she believed to be her 2020 IRA RMD in January 2020. Fortunately, Cynthia is in excellent financial shape and does not need or want to take any money out of her IRA.

Upon hearing of the RMD relief in the CARES Act, Cynthia called her advisor to learn whether she could roll back the RMD. She’s told that she cannot do so. Because she took her RMD in January 2020, neither the 60-day rollover rule nor the relief provided under Notice 2020-23 would allow her to roll back that amount in a timely manner.

Suppose, however, that in August 2020 Cynthia tests positive for COVID-19. As a result, Cynthia can retroactively classify her January 2020 distribution as a coronavirus-related distribution. In doing so, the rollover deadline for that distribution moves three years out from the date of receipt, thus allowing her to replace the would-be RMD in her account to avoid taxation on the distribution.

Relief via Revenue Procedure 2016-47: Another potential option for those who miss the 60-day deadline is to self-certify a late 60-day rollover via IRS Revenue Procedure 2016-47. Under this guidance, taxpayers have the ability to complete a 60-day rollover after the expiration of the rollover window.

To qualify, the hindrance must number among the 11 approved and outlined by the IRS in the revenue procedure. Furthermore, the rollover must be completed “as soon as practicable” with a 30-day safe harbor, after the hindrance no longer impairs the taxpayer’s ability to do so.

Unfortunately for many individuals, none of the IRS-listed hindrances will apply here — given there’s no built-in provision for Congress changing the law mid-year and eliminating RMDs. In other instances the potential qualifying condition, such as being ill, may not actually provide any more relief than is available via other means. For example, if an individual, their spouse or a dependent tested positive for COVID-19, they already can roll back the distribution for up to three years as a coronavirus-related distribution.

Nevertheless, if someone experienced some other health event in recent months — e.g., a non-COVID-related illness for themselves or a family member – that prevented them from engaging in a rollover of their unwanted RMD, relief under Revenue Procedure 2016-47 may still be available. Note that Revenue Procedure 2016-47 does not provide relief for the once-per-year rollover rule.

Note that in addition to the possible solutions outlined above, the 60-day-rollover window may also be extended via IRS approval in a private letter ruling, or PLR. Historically the IRS has not granted such requests when a taxpayer did not intend to roll over the amount at the time the distribution was taken.

Taxpayers thinking they were taking an RMD could not have possibly intended to roll over such amounts because RMDs are ineligible for rollover in the first place. But even if the IRS were able to see past its previous stance in light of the unusual situation, a PLR still comes with a $10,000 price tag — and that’s just the IRS fee. Add in preparation costs and you’re looking at an easy $15,000 – $20,000 tax bill.

Hope for future relief: If none of the various tactics discussed apply to a taxpayer, there is another thing that can be done — wait and hope. It is highly likely that at some point, the IRS will issue further guidance and grant additional relief around rollbacks of unwanted RMDs.

When RMDs were suspended in 2009, the IRS issued Notice 2009-82 in September of that year, allowing unwanted RMD distributions taken earlier in the year to be rolled back as late as November 30, 2009. And notably, there was even less reason to issue such guidance then, as the law that suspended RMDs for 2009 was passed in late December 2008.

Even if such relief is granted, however, it will not help mitigate once-per-year-rollover-rule issues. That sort of relief is something that only Congress can provide, via legislation.


IRA owners who took their RMD early in 2020, and who now would like to replace it, have the aforementioned tools available to them. But they have an additional hurdle to overcome to be able to roll back their RMD. More specifically, IRA owners have to be mindful of the once-per-year IRA rollover rule, which limits an individual to only one IRA-to-IRA or Roth IRA-to-Roth IRA 60-day rollover in any 365-day period.

Neither the regular 60-day rollover rules nor the provisions in IRS Notice 2020-23 offer any relief from this rule. Thus, an individual who took an early 2020 distribution believed to be an RMD, and who also completed a 60-day IRA-to-IRA or Roth IRA-to-Roth IRA rollover within the past 365 days, would be unable to complete another IRA-to-IRA rollover now using either the regular 60-day rollover rule or via Notice 2020-23.

Accordingly, this rule also creates unique problems for individuals who take their RMD monthly or in other regular installments. Only one such distribution could be rolled back using the 60-day rule or via Notice 2020-23. In other words, an individual may be able to roll over their January RMD, but doing so would trigger the once-per-year rollover rule, rendering them ineligible to roll over their February or any subsequent RMD.

While the once-per-year rollover rule puts a big dent in the ability for many IRA owners to return unwanted RMDs, there are still solutions to consider, such as:

Rolling over IRA distributions into an employer-sponsored retirement plan: If an individual has a non-IRA–based employer-sponsored retirement plan that accepts roll-ins, the 60-day rollover window or provisions in Notice 2020-23 can be used to roll an unwanted IRA distribution into the plan. IRA-to-plan rollovers are not subject to the once-per-year rollover rule.

Using a coronavirus-related distribution: While IRA-to-IRA 60-day rollovers and rollovers completed via Notice 2020-23 are both subject to the once-per-year rollover rule, the CARES Act treats coronavirus-related distributions rolled back into accounts as if the rollover was completed in a trustee-to-trustee manner.

Thus, if an IRA owner qualifies to treat a distribution in such a manner, they should be able to replace any unwanted IRA distribution amounts — up to the $100,000 limit for coronavirus-related distributions — in an IRA before the end of the three-year rollover deadline without once-per-year rollover complications.

Making a Roth conversion: For IRA owners confronting once-per-year rollover issues and who lack a non-IRA–based plan in which to roll over unwanted RMDs, another option is to make a Roth IRA conversion of those distributions back to a traditional IRA.

Notably, Roth IRA conversions are not subject to the once-per-year rollover rule. Such distributions will of course be taxable, but at least those amounts have the opportunity to grow tax-free.

Of course, while the Roth conversion option does help an individual get around the once-per-year rollover issue, it does not change the timeframe for which such a rollover must be completed. Therefore, such conversions must generally be completed during the 60-day rollover window, unless the provisions of Notice 2020-23 apply — in which case the conversion may be completed until as late as July 15, 2020.


Retirement account owners who have taken unwanted distributions have, as discussed above, a number of potential fixes at their disposal. Unfortunately the same cannot be said for non-spouse beneficiaries of both IRAs and employer plans.

Non-spouse beneficiaries of inherited retirement accounts are not eligible to do a rollover. Period. As such, extending the time period during which a rollover can be completed, such as via Notice 2020-23, is of no help to non-spouse beneficiaries.

While such beneficiaries are rarely subject to RMDs, they do exist in limited circumstances. A spouse-beneficiary of an IRA or employer-sponsored retirement plan can roll over the distributions to their own retirement account in what is known as a spousal rollover. Such distributions are, however, subject to the traditional rollover rules, including both the 60-day and the once-per-year rule.

Determining if an unwanted RMD can be Act

Clients hoping to avoid taking distributions from an account, especially at a time like this, are already quite fortunate. Nevertheless, for those who can meet living expenses without tapping retirement dollars, the CARES Act may help them avoid taking distributions from their account at depressed values. For others, the act’s provisions might allow them to make Roth IRA conversions in a more tax-efficient manner than would otherwise be possible.

And for those who need to or want to continue taking distributions, the door is always open.

Jeffrey Levine, CPA/PFS, CFP, MSA, a Financial Planning contributing writer, is the lead financial planning nerd at, and director of advanced planning for Buckingham Wealth Partners.

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