On March, 27, 2020, President Trump signed into law the CARES Act (Coronavirus Aid, Relief, and Economic Security Act). The CARES Act has several provisions that specifically impact Individual Retirement Accounts (IRAs) to help provide relief for many Americans. Please review the below information that may impact you if you own an IRA.
Required minimum distributions (RMDs) are waived for 2020
The CARES Act waives the requirement to take a required minimum distribution (RMD) in 2020 for IRA owners and beneficiaries of inherited IRAs, not just those directly affected by the COVID-19 pandemic. For IRA owners, RMDs must be taken when the owner reaches a certain age. This age is 70½ for individuals born before July 1, 1949 and age 72 for individuals born on or after July 1, 1949, as recently changed by the SECURE Act.
German American State Bank IRA Owners:
- If you do not have an automatic payment for your RMD established, there is nothing you need to do at this time.
- If you already signed up for an automatic payment of your RMD, you will receive a distribution calculated in the same manner as previously required.
- If you prefer to suspend your 2020 automatic distribution with our bank, please complete this 2020 Required Minimum Distribution Waiver Consent form, and return to the bank in the enclosed envelope or by email at [email protected]
Waiver of Early Withdrawal Penalties
Under the CARES Act, the 10% penalty for early withdrawals from a retirement account before age 59 ½ is waived. The penalty applies to qualified individuals for up to $100,000 of withdrawals taken in 2020. You would still need to pay an income tax on the funds withdrawn, however it can be paid over a three year period.
There is an option for certain individuals to recontribute or redeposit those funds back into a retirement account in 2020 without regard to contribution limits.
To be a “Qualified Individual” you must meet one of the following criteria:
- You, your spouse or your dependent are diagnosed with COVID-19
- You experience financial consequences as a result of the pandemic, such as furlough, reduced work hours, inability to work due to childcare, job loss or business closure.
- Other factors as determined by the Secretary of the Treasury.
Contribution Dates Extended to July 15, 2020
The Treasury Department extended the dates to file 2019 income tax returns to July 15, 2020. The CARES Act also extended the date to contribute to certain IRAs, Health Savings Accounts and Coverdell Education Savings Accounts in 2019 to July 15, 2020.
*Please contact your plan administrator for further details. Not all employer funded retirement plans would apply to these provisions. Eligibility requirements may apply to certain provisions.