BASKING RIDGE, NJ - As a member of Ed Slott's Master Elite IRA Group, WFP Tax Partners summarizes the recent legislature that was unanimously passed by the Senate as part of the "Coronavirus Aid, Relief, and Economic Security Act," or "CARES Act."

The CARES Act to be Signed into Law waives required minimum distributions (RMDs) for 2020; 10 percent Early Distribution Penalty Waived Up to Certain Amounts; and Plan Loan Rules Relaxed.

The Senate has unanimously passed the massive “Coronavirus Aid, Relief, and Economic Security Act,” or the “CARES Act,” and it is expected to be passed by the House and signed by the President on Friday. The legislation includes a waiver of required minimum distributions (RMDs) for 2020. This waiver applies to company savings plans and IRAs, including both traditional and Roth inherited IRAs.

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An RMD waiver is a huge help for clients who would have had to take a 2020 RMD based on much higher account values at December 31, 2019. Now they can sit out a year and avoid the tax bill on their 2020 RMDs, if they wish.

In addition, the CARES Act impacts 2019 RMDs for those with a required beginning date of April 1, 2020. Any 2019 RMD amount remaining and not withdrawn by January 1, 2020 is waived.

Another provision of the CARES Act waives the 10% early distribution penalty on up to $100,000 of 2020 distributions from IRAs and plans for affected individuals. The tax would be due, but could be spread evenly over 3 years, and the funds could be repaid during the 3 years.

Finally, the new law affects company plan loans taken by affected individuals. First, the law increases the maximum amount of plan loans to the lesser of $100,000 (reduced by other outstanding loans) or 100% of the account balance. [The usual limit is the lesser of $50,000 (reduced by other outstanding loans) or 50% of the account balance.] This rule applies to loans taken within 180 days from the bill’s date of enactment. Second, any loan repayments normally due between date of enactment and December 31, 2020 could be suspended for one year.


Walter Pardo, CWS®, PPC™ may be reached at (877) 714-2362.

22 Church Street   |   P.O. Box 60   |   Liberty Corner, NJ 07938   |   877-714-2362

Walter Pardo is the CEO of Wealth Financial Partners & WFP Tax Partners, located in the historic Liberty Corner section of Basking Ridge, NJ. He is a Certified Wealth Strategist and Professional Plan Consultant with Series 7, 66 and 63 licenses. Walter is licensed in the states of AZ, CA, CT, FL, KS, OH, NY, NJ, IL, PA, SC, and TX, and VA. Walter is a Master Elite member of the Ed Slott Elite IRA Advisor Group℠. He is active in his community in central New Jersey, and currently serves on the Board of Trustees of Loyola Jesuit Center in Morristown. 

Registered Representative offering securities and advisory services through Independent Financial Group, LLC (IFG), a registered broker-dealer and investment advisor. Member FINRA/SIPC. Wealth Financial Partners, LLC and IFG are unaffiliated entities. OSJ: 12671 High Bluff Dr. Suite 200, San Diego, CA 92130.