SECURE Act and CARES Act Changes to Retirement Minimum Required Distributions
Tax rules1 require retirement plan participants to start their benefits by a specific date. Generally2, this date is based on the age of the participant and whether the participant is still working after reaching that age. Before the SECURE Act, these distributions – called Required Minimum Distributions or RMDs – had to start by a “Required Beginning Date” which was April 1 of the calendar year following the date the participant reaches age 70-1/2, or, if later, April 1 of the calendar year after the participant’s employment terminates.
The SECURE Act permanently modifies the age trigger for Required Minimum Distributions.3 The Required Beginning Date (for any participant attaining age 70-1/2 after January 1, 2020) is now April 1 of the calendar year following the date the participant reaches age 72, or, if later, April 1 of the calendar year after the participant terminates employment. The SECURE Act did not impact the Required Minimum Distribution rules and Required Beginning Date for any participant who attained age 70-1/2 before January 1, 2020.
The CARES Act change is only for 2020 and permits defined contribution plans, IRAs and 403(b) arrangements to suspend Required Minimum Distributions payable for 2020.4 Guidance on this temporary change to RMDs was issued by the IRS in IRS Notice 2020-51 in the form of Q&As and a Model Plan Amendment. This guidance permits the rollover of any RMD 2020 that is distributed and extends the normal 60-day rollover period until August 31, 2020. The CARES Act change recognizes that 2020 RMDs, based upon the high value of retirement plan accounts at the end of 2019, did not take into account the volatility of the market in 2020 as a result of the COVID-19 pandemic.
According to Notice 2020-51, any participant who is supposed to get an RMD for 2020 can waive the payment. If the 2020 RMD has already been distributed, the RMD will be eligible for rollover into any eligible retirement plan or return to the distributing plan if that plan accepts rollovers. The distributions impacted by the CARES Act include RMDs paid in 2020, or RMDs paid in 2021 for the 2020 calendar year where the employee’s Required Beginning Date is April 1, 2021.
Consistent with the model amendment, a plan can be amended to either (1) pay out all RMDs for 2020, subject to a participant’s election not to receive that RMD; or, (2) not pay out any RMDs. subject to a participant’s election to receive it. Since plan amendments for these RMD changes are not required until the last day of the first plan year beginning on or after January 1, 2022 (for calendar year plans this is December 31, 2022), plan administrators need to document the plan’s operational compliance with these changes.
 See: Code Section 401(a)(9)
 Plan participants who own 5 percent or more of the Company must start their benefits no later than April 1 following the date they reach the age that triggers the Required Minimum Distribution, even if they continue to work.
 SECURE Act changes to beneficiary distributions are beyond the scope of this article.
 See: Code Section 401(a)(9)(l). This waiver is similar to legislation passed in response to the 2008 financial crisis permitting the suspension of RMDs for 2009, the Worker, Retiree, and Employer Recovery Act (WRERA) of 2008 (Pub. L. No. 110-458).