Remember RMD Requirements

The SECURE Act and the CARES Act changed the rules for required minimum distributions (RMDs) in 2020 and 2021, and the IRS has issued a handy reminder concerning the new rules for them. 

2020 RMD Waiver

RMDs were waived for 2020 for IRA and workplace retirement plan account holders, including individuals who either: 

• reached age 70½ in 2019 and had their first and second RMDs due in 2020, or 
• had their first RMD due on April 1, 2021, for 2020. 

2021 RMD

The waiver of RMDs as part of the CARES Act for 2020 was not extended to RMDs for 2021. IRA account holders and participants in retirement plans are subject to RMDs for 2021. 

If you reached age 70½ in 2019, your RMDs due in 2020 were waived. You have a 2021 RMD due by Dec. 31, 2021, based on your account balance on Dec. 31, 2020.

If you reached age 72 in 2021, (and didn’t reach 70 ½ in 2019) your 2021 RMD is due by April 1, 2022, based on your account balance on Dec. 31, 2020. Your 2022 RMD is due by Dec. 31, 2022, based on your account balance on Dec. 31, 2021.

If you’re still employed by the plan sponsor and are not more than a 5% owner, you can delay RMDs from that workplace retirement plan until you retire. RMDs are always required from traditional IRAs, SEP, SIMPLE and SARSEP IRA plans even if you’re still employed. 

If you left your job in 2021 and rolled over your workplace retirement plan account into your IRA, the RMD from your IRAs for 2021 won’t be affected by the rollover, but you may have an RMD due from the retirement plan. Remember that:   

• Amounts rolled over to an IRA from a workplace retirement plan in 2021 will not affect the IRA RMD calculation, since 2021 RMDs are based on the IRA account balances on Dec. 31, 2020. 
• If one has a 2021 RMD due from a workplace retirement plan, it cannot be rolled over to one’s IRA. 

IRA Beneficiaries

Beneficiaries of IRAs must follow special distribution rules. The SECURE Act changed how and when they must take distributions when the account holder dies after 2019. Under the CARES Act, beneficiaries do not have to take RMDs for or during 2020. 

For a 2019 death, life expectancy distributions, if applicable, generally would be required to start by the end of 2020. Since the CARES Act waived all 2020 RMDs, to use the life expectancy option, generally one must begin taking distributions by the end of 2021. Those who do not will be required to take a complete distribution under the 5-year rule.

For distributions based on the 5-year rule for deaths that took place before 2020, one does not count 2020 as one of the five years. One would have until the end of the 6th year following the year of death for deaths in 2015 through 2019.

For a 2020 death, life expectancy distributions, if applicable under the SECURE Act, would generally be required to start by the end of 2021.