Can an individual redeposit the 2019 or 2020 RMD taken before the CARES Act was enacted?

Generally RMDs are not eligible for rollover.  Furthermore, rollovers must be completed within 60 days of receiving a distribution, and each taxpayer may only do one 60-day rollover in any 12-month period.

Initial guidance in Notice 2020-23, published by the IRS on April 9, provided limited relief with respect to the 60-day window for taxpayers who:

  • Took an RMD between February 1 and May 15, 2020, AND
  • Didn’t complete another indirect rollover in a 365-day period preceding the date these funds are redeposited, AND
  • Redeposit the funds to a retirement plan or IRA by July 15, 2020.

This guidance, however, didn’t contain relief for withdrawals from retirement accounts taken from January 1 to January 31 or those individuals who took more than one withdrawal from their IRA in 2020.

On June 24, in Notice 2020-51, the IRS provided broader relief through August 31, 2020:

  • By waiving the usual 60-day rollover timeframe, even those taken in January 2020, the IRS extended the deadline to return all unwanted 2020 RMDs through August 31, 2020.
  • The IRS clarified that the RMDs that came out of IRA accounts should be repaid back to the same IRA account. RMDs originating in employer-sponsored retirement plan may be moved back to the same plan or an IRA.
  • The one-rollover-per-12-month limit doesn’t apply for this purpose, so RMDs that are taken periodically may be packaged and redeposited.

Importantly, retirement account non-spouse beneficiaries who are generally not allowed to roll amounts over are also permitted to take advantage of the opportunity to undo their 2020 RMD. Note: Generally, non-spouse inherited IRA RMDs cannot be rolled over. Notice 2020-51 created an opportunity for beneficiaries of non-spousal inherited retirement accounts to redeposit unwanted RMDs through August 31, 2020.

While the CARES Act waived RMDs from both inherited traditional IRAs and inherited Roth IRAs, it didn’t specifically call out payments already received from Inherited IRA accounts by non-spouse beneficiaries as eligible for repayment.

Cetera Retirement Plan Specialists is a third-party administrator and may not offer tax, legal or investment advice. Plan sponsors should consult their own tax, legal or investment professionals.