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In Notice 2020-51, the IRS announced that certain defined contribution plan participants and individual retirement account/annuity (IRA) owners and beneficiaries who took required minimum distributions (RMDs) in 2020 can roll those amounts back into a defined contribution plan or IRA.

Background

In response to the coronavirus pandemic, the CARES Act, on March 27, 2020, added IRC Section 401(a)(9)(l), allowing participants in 401(k) plans, 403(b) plans or IRAs to waive their RMDs for 2020 (the waiver does not apply to defined benefit plans). In addition, the SECURE Act changed the required beginning date to April 1 of the calendar year following the calendar year in which an individual turns age 72 (instead of 70 ½).

Generally, plan participants or IRAs owner who take a non-RMD distribution have 60 days to roll over the distribution into another plan or IRA. Because the CARES Act waived the RMD requirement for 2020, what were considered RMDs are now considered other distributions to which the 60-day rollover rule would apply. Some people, however, took distributions in 2020 that they thought were RMDs and did not learn until after the 60-day rollover period ended that those distributions were not actually required.

The IRS initially granted relief for this problem by issuing Notice 2020-23, which extended to July 15, 2020, the time frame for this and many other time sensitive acts due on or after April 1, 2020. RMDs taken before February 1, however, were ineligible for this relief because the 60-day window expired before April 1.

Notice 2020-51

Notice 2020-51 gave relief to people in this situation by extending the 60-day rollover period so the deadline will not be before August 31, 2020. For example, plan participants who took what they thought was an RMD from a defined contribution plan before the CARES Act change will have until August 31, 2020, to roll over those amounts. In addition, if an IRA owner or beneficiary repays the distribution to the same IRA by August 31, the repayment will not be treated as a rollover for purposes of the one-rollover-per-12-month-period limitation and the restriction on rollovers for non-spousal beneficiaries of inherited IRAs.

Notice 2020-51 includes sample plan amendments that can be used to give participants and beneficiaries the choice between receiving and not receiving distributions, as well as Q&As addressing specific situations.

Implications

As anticipated, the relief in Notice 2020-51 is similar to the relief in Notice 2009-82, which addressed the 2009 RMD waiver under the Worker, Retiree, and Employer Recovery Act of 2008, enacted in the midst of the financial crisis.

The relief in Notice 2020-51 gives individuals and employers choices. Individuals may choose to take advantage of the relief as to any portion of their putative RMDs. Employers generally may choose how to implement the relief, and plan amendments generally will not be needed until December 31, 2022, or later.

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