RMDs in 2021

Experts from Groom Law Group and CAPTRUST answer questions concerning retirement plan administration and regulations.

I realize that required minimum distribution (RMD) requirements were waived for 2020, but what about 2021? Are there any distributions due on April 1? How about December 31?”

Charles Filips, Kimberly Boberg, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

As of this writing, the Coronavirus Aid, Relief and Economic Security (CARES) Act relief that waived the minimum distribution requirement under defined contribution (DC) plans and individual retirement accounts (IRAs) for 2020 has NOT been extended into 2021. However, there will be some residual effects of the CARES act in 2021, as well as some remaining transition from the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which increased the age at which minimum distributions must commence from age 70.5 to 72.

The good news is that there will be no RMDs under DC plans and IRAs due on April 1 of this year. Essentially, the April 1, 2021, initial RMD is the 2020 RMD, just delayed.

As a result, for people who turned age 70.5 prior to 2020, but retired in 2020 (excluding 5% owners, who are not permitted to defer RMDs until retirement), their initial RMDs would have normally been due on April 1, 2021, but the CARES Act waived that requirement. Keep in mind, though, that 2021 RMDs are not waived and will be due again this year. Thus, those individuals will have an RMD due on December 31, 2021 (which is the 2021 RMD). RMDs are also due by December 31 for people who began receiving required minimum distributions prior to 2020 (or who would have begun receiving them in 2020 absent the waiver)—in other words, people who turned age 70.5 prior to 2020 and retired prior to 2020.

The first people for whom the new age of 72 will apply under the SECURE Act will be those who turn age 72 in the last six months of 2021 and who retire prior to the end of 2021; for them, the initial RMD will be due on April 1, 2022. That same date will apply to people who turned age 70.5 prior to 2020, but did not retire until 2021.

Confusing? This is all assumes that your plan provides for the later of retirement or age 70.5 or 72, as applicable, and it would have been even more confusing if the CARES act hadn’t waived RMDs for 2020, so we can be thankful for that!


NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.

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