We all know that individuals who have passed age 70 ½ are required to receive Required Minimum Distribution payments each year from their IRAs and qualified plans.  Individuals who inherit any of those assets are also required to take yearly Required Minimum Distribution amounts from those assets as well.  It should be remembered however, that no Required Minimum Distribution payments are due from an individual’s own Roth IRA, while the individual is alive, but once the individual has died, each of their non-spouse beneficiaries are then required to receive yearly Required Minimum Distribution payments each year from that account.

How are those rules affected by the Covid 19 virus and its devastating effect on the nation’s economy?  As was done in the immediate aftermath of the 2008 financial crisis, Congress has once again passed legislation easing the requirements that individuals take yearly Required Minimum Distribution payments.

On March 27, 2020, Congress passed, and the President signed into law, the Coronavirus Aid, Relief and Economic Security Act (the “CARE Act”), which eliminates the requirement for most individuals to have to take any Required Minimum Distribution payments in 2020.  This relaxation of that rule applies not just to individuals who had been a participant in a qualified plan or the owner of an IRA, but also applies in 2020 to their beneficiaries as well, following the individual’s death.  The one exception to the change in this rule is applicable to participants in defined benefit plans, who are still required to take their 2020 Required Minimum Distribution payments.

The new rule is also effective for individuals who had turned age 70 ½ in 2019, but who had deferred their first Required Minimum Distribution payment until April 1, 2020.  In addition, the new rule also states that the 2020 Required Minimum Distribution payment which has been skipped, will not be required to be made up or taken in any subsequent year.

The question then becomes, what about someone who had already taken a portion or all of their Required Minimum Distribution amount for 2020?  Is there any relief for that individual?  The answer is yes.  The new rules allow that individual to rollover the distribution back into the retirement asset, as long as they can do it within the 60 day rollover period.  To further assist those individuals, the IRS has issued Notice 2020-23 , which automatically extends the 60 day rollover period to July 15, 2020, for those individuals who had received a distribution from their retirement asset between February 1, 2020 and May 16, 2020.

So if you were planning to take your Required Minimum Distribution payment in 2020, or had already taken that amount, you may want to reconsider and not make that payment, or if already made, reverse that payment.  However, nothing requires you to skip that Required Minimum Distribution payment.  So if you want to, you are entirely free to take that distribution in 2020, even though it is no longer required.

However before deciding on not taking any Required Minimum Distribution payment in 2020, you may want to consider the New York State rule that exempts the first $20,000.00 in retirement distribution payments from New York State income taxation.  So any amount that you take from your retirement asset in 2020, up to the $20,000.000 amount, will not be subject to New York State income taxation.  And with the Federal standard deduction set at $27,400.00 for 2020 for a married couple filing jointly who are each over age 65, you may be able to exempt a significant portion of that plan or IRA distribution from Federal income taxation as well.  You therefore may want to discuss the decision to forego any 2020 Required Minimum Distribution payment with your accountant or other financial advisor, before committing yourself to any specific course of action.