Top 7 RMD Changes With the CARES Act

Top 7 RMD Changes With the CARES Act

With turning 72 (or 70 1/2 prior to December 31, 2019), you’re normally required to make annual distributions from your 401(k), IRA, or other tax-advantaged retirement accounts (excluding Roth IRAs). If you fail to take a required distribution, you’re taxed heavily (50%) on the amount you were required to withdraw. Thanks to the CARES Act, you are not required to take money out of your retirement accounts in 2020. The upside of not having to take your RMD this year for many investors is that you can leave your investments alone and not have to worry about liquidating or taking a piece of your investment in-kind to satisfy your RMD. There is also the advantage of not having to pay taxes on the funds taken for RMD purposes. Read on to learn about the top 7 changes to RMDs with the CARES Act.

CARES Act: Top 7 RMD Changes

1. 2020 RMDS Are Waived For IRA Owners & Beneficiary Accounts

The CARES Act has waived RMDs for defined contribution plans, governmental eligible deferred compensation plans, and individual retirement plans (which are IRA accounts and IRA annuities).

This includes accounts the individual owns personally and is a beneficiary of. RMDs have been waived for both of these cases with the CARES Act (Section 2203).

Please note: RMDs are not waived for defined benefit plans.

2. 2019 RMDs Waived Until April 1, 2020

For an individual whose first RMD year was 2019, they had the option of deferring their RMD until April 1, 2020. This waiver only applies if the first year’s (2019’s) RMD was not taken by December 31, 2019, and the individual intended on satisfying their first year requirement in 2020.

3. Distributions Can Be Rolled Back Into an IRA

RMDs are not typically eligible to be rolled over to another IRA. However, because RMDs are waived for 2020, distributions done this year can be rolled back into an IRA in order to avoid paying taxes on those funds as long as this is done within 60 days from receiving the funds. Additionally, a distribution that is properly rolled over is excluded from income reported for that year.

Please note: The one-per-year rule still applies (see number four).

4. The One-Per-Year Rollover Rule Still Applies

Taking a distribution from an IRA account and then rolling the funds into another IRA within the 60-day window (which is referred to as an indirect rollover) can still only be done once per calendar year. This does not apply to Roth conversions or rollovers where an employer-sponsored retirement plan, a 401(k) for example, is on the distribution or rollover end of the transaction).

5. The 60-Day Rollover Extension/Waiver


The 60-day rollover period can be extended if the 60-day deadline was missed due to a timing error by the financial institution or due to any of the reasons listed in Revenue Procedure 2016-47. If this happens, the rollover contribution may be made as soon as possible, but generally within 30 days of the missed deadline.

The deadline is generally postponed due to a federally declared disaster. This year, in response to COVID-19, the deadline for completing a rollover was extended to July 15, 2020 under IRS Notice 2020-23.


With the IRS Private Letter Ruling (PLR) request, the IRS may waive the 60-day rollover requirement. However, the IRS charges a hefty fee of $10,000 to review these waiver requests, with no guarantee of a favorable ruling. The IRS considers the circumstances of each case when making a decision. The IRS uses guidelines (available in IRS Revenue Procedure 2003-16).

These are just a few of the circumstances in which the 60-day deadline can be considered under the waiver.

6. RMDs Can’t Be Rolled Over From Beneficiary Accounts

Except for spousal beneficiaries, an individual may not roll over any portion of a distribution from an inherited retirement account.

Under the spouse-beneficiary provision, the rollover may not be made to a beneficiary (inherited) retirement account and must be made to the spouse’s own IRA (non-Beneficiary IRA).

7. The 5-Year Rule Becomes 6

The 5-year period is extended by one year if 2020 is part of those 5 years. See the table below.

Year the Account Owner Died Year the Account Must be Fully Distributed
2015 2021
2016 2022
2017 2023
2018 2024
2019 2025

For questions regarding how these RMD changes with the CARES Act affects you, contact your tax and/or financial advisor today. If you have questions about how this specifically affects your IRA account at Midland, you can reach us by calling (239) 333-1032 or by visiting

MIDLAND TRUST IS NOT A FIDUCIARY: Midland’s role as the custodian of self-directed retirement accounts is non-discretionary and/or administrative in nature. The account holder or his/her authorized representative must direct all investment transactions and choose the investment(s) for the account. Midland has no responsibility or involvement in selecting or evaluating any investment. Nothing contained herein shall be construed as investment, legal, tax, or financial advice or as a guarantee, endorsement, or certification of any investments.