Section 401(a)(9) of the Internal Revenue Code requires a qualified retirement plan – including 401(k) plans – to make certain required minimum distributions (RMDs) to plan participants starting by the participant’s required beginning date.
The SECURE Act was signed into law in December of 2019. The SECURE Act amended section 401(a)(9) of the Code to change the required beginning date applicable to section 401(a) plans and other eligible retirement plans, including IRAs. The new required beginning date for an employee or IRA owner is generally April 1 of the calendar year following the calendar year in which the individual attains age 72 (rather than April 1 of the calendar year following the calendar year in which the individual attains age 70½) and the new required beginning date applies to distributions required to be made after December 31, 2019, with respect to individuals who attain age 70½ after that date.
You may recall that the CARES Act was signed into law back in March. The CARES Act added section 401(a)(9)(I) to the Code, and provided for a waiver of RMDs for defined contribution plans (including 401(k) plans) and IRAs for 2020. This waiver also applies to the 2019 RMD for an individual who has a required beginning date of April 1, 2020, that was not paid in 2019 (and therefore would have been due to be paid between January 1, 2020 and April 1, 2020).
Before the CARES Act was signed into law, many 401(k) plan participants had already received an RMD in early 2020. To assist these plan participants, the Treasury Department and the IRS previously extended the 60-day rollover period for any such RMD payments so that the deadline for rolling over such a payment will not be before August 31, 2020. For example, if a participant received a single-sum distribution in January 2020, part of which was treated as ineligible for rollover because it was considered an RMD at that time, that participant has until August 31, 2020, to roll over that part of the distribution.
If you have not already, please get with your recordkeeper or third-party administrator to identify any 401(k) plan participants who received an RMD in 2020 and make sure that someone has reached out to these participants to ensure they are aware of the August 31 deadline next week.