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The CARES Act and Required Minimum
Distributions (RMDs): Options for Certain
Individuals
April 21, 2020
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136) includes a
provision that suspends Required Minimum Distributions (RMDs) from certain retirement accounts for
2020. Some individuals may have already taken this distribution prior to the enactment of the CARES
Act; this Insight discusses an option that might be available to them.
Required Minimum Distributions
RMDs are annual withdrawals that individuals with certain retirement accounts may b roqired to make
under specified conditions, such as after (1) reaching a certain age or (2) inheriting a retirement account.
The RMD assures that tax-deferred retirement accounts established to provide income during retirement
are not used as permanent tax shelters or as vehicles for transmitting wealth to beneficiaries. Failure to
take the RMD results in a tax penalty equal to 50% of the amount that should have been distributed.
RMD rules apply to defined contribution (DC) accounts (such as 401(k), 403(b), and 457(b) accounts)
and traditional Individual Retirement Accounts (IRAs). RMDs do not apply to Roth IRAs, but do apply to
Designated Roth Accounts.
Calculating the RMD
The RMD for a year is calculated by dividing (1) the account balance at the end of the immediately
preceding calendar year by (2) the distribution period provided in the applicable Intemal Rcvenue Servce
(IRS) Life Expectancy -Iable.
Individuals must take their first RMD by April 1 of the year following the year in which they turn age 72
(age 70'2 for those who turned 70' 2 before January 1, 2020; the Setting Every Community Up for
Retirement Enhancement Act of 2019 [SECURE Act, enacted as part of the Further Consolidated
Appropriations Act, 2020, P.L. 116-94] increased the age after which RMDs must begin). Participants in
employer-sponsored plans (other than individuals who own 5% or more of the company sponsoring the
Congressional Research Service
https://crsreports.congress.gov
IN11349
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