On March 27, the President signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES” Act), the third COVID-19 relief bill, into law. The more than $2 trillion package seeks to address financial pressures facing individuals, businesses, and state and local governments due to the pandemic. The law also provides emergency funding for hospitals, testing, and vaccine development.

Notable provisions of the CARES Act that will impact IRA accounts include:

1. Waiver of Required Minimum Distributions (RMDs) for calendar 2020.
2. For those who qualify CARES Act allows for a coronavirus-related distribution in 2020 from IRAs of up to $100,000 without it being subject to the 10% early withdrawal penalty if the IRA owner is under 59 ½. The income tax on the coronavirus-related distribution may be spread evenly over 3 years. Or, the distribution may be repaid to an eligible retirement plan within a 3-year period.

Please note that we are awaiting additional details and clarification from the IRS and/or Treasury. The details provided below are based on the information currently available. If additional information is provided, We will issue a follow-up communication.

• Required Minimum Distributions (RMDs) for 2020 have been waived for all IRAs and retirement plan accounts. This includes RMDs from inherited IRAs that were established prior to 2020.

CORONA-RELATED IRA Distributions

•  Today IRA account owners have the ability to take distributions from their IRA account. Some withdrawals may be taxable and some may be subject to a 10% early withdrawal penalty. The CARES Act established special tax rules for qualifying COVID-19 related distributions that are taken in 2020. A distribution may be eligible for special tax treatment under the CARES Act for an individual:
  • Who is diagnosed with SARS-COv-2 or COVID-19 by a test approved by Center for Disease Control and Prevention
  • Whose spouse or dependent is diagnosed with SARS-COv-2 or COVID-19 by such a test; or who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to SARS-COv-2 or COVID-19; or other factors as determined by the Treasury Secretary (or the Secretary’s delegate.)
  • The qualifying distribution is limited to $100,000 for each individual and would not be subject to the 10% early withdrawal penalty if under 59 1/2.
• In addition, the income tax due on the taxable portion of the qualifying distribution may be spread evenly over 3 years. The qualifying distribution may also be repaid to an eligible retirement plan within a 3-year period.

Further information can be found on Fidelity’s website by clicking here.