Sen. Ed Markey (D-MA) has proposed legislation (S. 3527) to suspend for 2020 the obligation to withdraw required minimum distributions (RMDs) from employer-sponsored retirement plans and IRAs in response to investment market volatility accompanying the coronavirus (COVID-19) pandemic. Sen. Markey has also announced plans to introduce another bill to exempt Social Security benefits received in 2020 from taxation. (Taxation of Social Security benefits generally is means-tested, with amounts exceeding $25,000—$32,000 for married couples—subject to income tax.)
Retirement plan withdrawals generally are required annually for those who reached age 70½ in 2019 or a prior year, or who reach age 72 in 2020 or a later year (some who are still employed after these ages can further delay withdrawals from certain retirement plan).
In a news release issued Wednesday, March 18, Sen. Markey noted that the formula used to calculate these annual RMDs—which is based on December 31, 2019, values that preceded the recent markets downturn—would consume a disproportionate share of these individuals’ retirement savings. Thus, this reflects the importance of this 2020 RMD suspension.
The legislation based on S. 3527 bill text at Sen. Markey’s website, and which has bipartisan support, would do the following.
- Suspend otherwise-required 2020 RMDs from qualified retirement plans, 403(b) plans, governmental 457(b) plans, and individual retirement arrangements (IRAs).
- 2020 will be disregarded for purposes of the 5-year period for required depletion of an inherited IRA or retirement plan account.
- Mandatory withholding (e.g., 20%) would not be applied to 2020 amounts withdrawn from these retirement savings arrangements, exempt up to such amount(s) that would represent RMDs if not for the 2020 exemption.
- Retirement plans may operationally comply with these provisions, but must amend for the changes by the last day of 2022 plan years (2023 plan years for governmental plans).
- An individual’s required beginning date for RMDs (generally April 1 of the year after attainment of RMD age or, if later, the year of retirement) would not be altered by a 2020 suspension.