The IRS recently issued Notice 2020-51 to provide guidance for taxpayers who had already taken required minimum distributions (RMDs) from certain retirement plans, including 401(k) plans, 403(b) plans or IRAs, in 2020 before the Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted in March. The CARES Act waived the RMD requirement for 2020.
With the release of this Notice, taxpayers who already took an RMD in 2020 from retirement plans or IRAs may repay the distribution by rolling those funds back into their retirement account. The deadline to do so is Aug. 31, 2020.
Recently released Notice 2020-52 provides guidance for employers that sponsor safe harbor 401(k) plans. Previously, the Internal Revenue Code did not permit plan sponsors to reduce or eliminate safe harbor contributions midyear to their 401(k) plans. Due to the COVID-19 pandemic and unexpected financial challenges facing employers, the Notice permits plan sponsors to make a midyear amendment to reduce or suspend safe harbor contributions. The Notice provides relief in the form of two alternatives for plan sponsors and requires immediate action:
Please reach out to your Baker Tilly tax professional to discuss how these changes may affect your situation.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.