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Cares Act Update

The CARES Act provides many provisions that may have an impact on your business, personal finances or retirement plan. The plan is very large in scope and many of the details are still yet to be determined. From what we have gathered so far, the following information should be useful:

Required Minimum Distributions (RMD)

    A Required Minimum Distribution is the distribution from a retirement account required to by law to take annually at the age of 70 ½.

  • For the year of 2020, all Required Minimum Distributions (RMD) have been waived for all IRA and retirement accounts. This includes RMD’s from inherited IRAs that were established prior to 2020.
  • If you take a distribution it is considered voluntary and not required. You can still take your distribution.
  • Any distributions already taken can be rolled back into the account using the 60-day rollover rule.
  • Custodians will not send out any RMD letters to clients this year. You should be receiving a letter verifying that it has been waived.
  • If you have an automatic withdrawal currently in place, you will have to contact us in order to stop the withdrawal.

Coronavirus Related Distribution (CRD)

    • IRA account owners have the ability to take distributions from their account. Some withdrawals may be taxable and some may be subject to a 10% early withdrawal penalty. The CARES Act established special tax rules for qualifying COVID-19 related distributions that are taken in 2020. If you meet the qualification requirements, you can take a penalty free distribution from an IRA and Employer Sponsored Retirement Plan.

 

    You can qualify for a CRD by meeting one of the following criteria:

  • Diagnosed with SARS-COv-2 or COVID-19 by a test approved by Center for Disease Control and Prevention.
  • Spouse or dependent is diagnosed with SARS-COv-2 or COVID-19 by such a test.
  • Experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to SARS-COv-2 or COVID-19; or other factors as determined by the Treasury Secretary (or the Secretary’s delegate.)

IRA Custodians and Employee sponsored retirement plans will rely on you to certify you meet the CRD requirements. Essentially, the burden of prove you meet one of the conditions is yours.You must work with your tax advisor to ensure the 10% penalty is waived, as well as getting their guidance on how to stretch your tax liability over 3 years. If you repay the CRD within a three year period following the date of distribution