New Rules on 60-Day Rollover: Everything You Need to Know

With the CARES Act providing new relief for RMD rollover, many people are looking to take advantage of the ability to roll their required minimum distributions into an eligible retirement plan, so that they might keep their money growing and reduce their tax liability for the year. While the relief is popular among many people who are subject to required minimum distributions, it is important to understand the rules that need to be followed in order to take advantage of the 60-day rollover relief. 

Typically when a taxpayer has received a required minimum distribution that is unwanted, those funds would need to be rolled over within the 60-day window. But with the new relief added in the CARES Act the RMD will be allowed to be indirectly rolled over and no longer considered an RMD. 

Typical Indirect Rollover Rules

An indirect rollover will occur when the funds are returned to the same retirement account, or a different one before 60 days have elapsed. When done within the correct time frame, taxation may be avoided. The 60-day window will go into effect the day that the taxpayer receives the distribution, not when it is requested. This only may be done once per year and violation of this rule may result in the inability to perform another rollover. 

New Rules Regarding the 60-Day Rollover

The new rules for the 60-day window were laid out in the $2 trillion CARES Act, which extended the deadlines, by allowing those who took thei distributions between the first of February and mid-May to have until July 16th to return it to their account without penalty. To take advantage of this new relief, there are a few rules that need to be followed.

  • The distribution must have been received between February 1st and May 15th. Any distributions before or after must still follow the 60-day rule. 
  • If a rollover has already been done for the year the one-per-year rule still applies and another cannot be done.
  • For those who turned 70 1/2 in 2019, the CARES Act will waive any distributions not taken before the close of 2019, but will not provide relief for RMDs that have been taken.

For taxpayers that fall under the requirements, the new 60-day rules regarding the rollover provided by relief under the CARES Act allows them to allow their money to continue to grow and also avoid the tax liability that may come with unneeded RMDs.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.


Content Provider: WriterAccess

LPL Tracking 1-05031497