RMD and CARES Act

[casey72]

If participant died in 2020 and estate is beneficiary (subject to 5-year rule), CARES act said 2020 is ignored for purposes of 5-year rule. Is distribution due in 2026, or was it due in 2025?

Recordkeeper is arguing that we create a fiction that participant died in 2021, such that distribution is due in 2026.

I don't think that's what CARES Act said but it would be a good result if everyone here thinks recordkeeper is right!

[CuseFan]

Ordinarily, the 5-year rule is the 12/31 of the year containing the 5th anniversary of the participant's death. If death was x/x/2020 then 5th anniversary is x/x/2025 and entire benefit should have been distributed by 12/31/2025. However, and this comes from the IRS website where you can essentially treat 2020 as if it never existed. The excerpt below says inherited IRAs but earlier language also refers to retirement plans and I can't see them saying 2020 disappears only for IRAs.

https://www.irs.gov/newsroom/coronavirus-relief-for-retirement-plans-and-iras

Distributions from inherited IRAs are not required in 2020. If you were required to take a distribution within 5 years following the year of the account holder’s death, 2020 does not count toward the 5 years. So, you would essentially have six years, instead of five, to distribute the inherited IRA.

Also, if the account holder died in 2019, you would normally be required to begin taking distributions by the end of 2020 to be able to take distributions over your lifetime. Since 2020 does not count, you have until the end of 2021 to begin taking distributions over your lifetime.