Both the SECURE Act, passed in December 2019, and the CARES Act, passed in March 2020, have affected significant changes for both Individual Retirement Accounts (IRAs) and Health Savings Accounts (HSAs). While the SECURE Act provided the most comprehensive retirement reform package in over a decade and its provisions are permanent changes, the CARES Act specifically addresses unique challenges and considerations during the COVID-19 crisis.
2020 REQUIRED MINIMUM DISTRIBUTION (RMD) WAIVER
RMDs that would have normally been mandatory in 2020 are waived. Credit union IRA owners, as well as beneficiaries of inherited IRAs, will be mailed an RMD Waiver form in May. Members should complete and return this form to any DoverPhila branch location to cancel remaining scheduled distributions for 2020. The credit union will process periodic payments, as scheduled, if no form is received.
RMD ROLLOVER/REPAYMENT WINDOW
An extension has been granted to August 31, 2020 for rollovers of withdrawals that were believed to be required prior to the CARES Act RMD waiver provision. Rollovers are limited to the amount of the waived RMD and will not be subject to the One-per-12-Month rule. Contact DoverPhila’s IRA Services Department with eligibility questions.
60-DAY ROLLOVER WINDOW
An extension has been granted to July 15, 2020 for rollovers that should have been completed on or after April 1, 2020. Rollovers are still subject to the one-per-12-month rule. Members who have eligibility questions should contact the IRA Services Department.
CORONAVIRUS RELATED DISTRIBUTIONS (CRDs)
Qualified withdrawals are allowed up to $100,000 between January 1, 2020, and December 31, 2020. These are exempt from the 10% early distribution penalty.
Qualified individuals include those diagnosed with COVID-19, those whose spouse or dependent is diagnosed with COVID-19, or those who experience adverse financial consequences due to any of the following related to COVID-19, such as being quarantined, furloughed, or laid off; having work hours reduced; or being unable to work because of lack of child care.
CRDs repaid within a three-year period will be considered to have met the 60-day rollover requirement. These withdrawals will be taxed over a three-year period, unless the individual elects otherwise. Please consult a tax advisor.
TESTING & TREATMENT FOR COVID-19 (TELEHEALTH & REMOTE CARE SERVICES)
Health insurance plans can pay for telehealth and remote care services, even if the deductible has not yet been met, and will not affect high deductible health plan (HDHP) eligibility for HSA purposes. This is effective for plan years beginning on or before December 31, 2021.
Group health plans must provide coverage for diagnostic testing for COVID-19 with no cost sharing and no prior authorizations – until the Secretary of Health and Human Services determines the public health emergency has expired.
NEW QUALIFIED MEDICAL EXPENSES
Certain over-the-counter medicines and products no longer require a prescription to be considered qualified medical expenses; the CARES Act definition specifically includes over-the-counter menstrual care products. See IRS Publication 502 for a complete list of qualified medical expenses for HSA purposes.
OVERVIEW OF SECURE ACT UPDATES AFFECTING IRAs
Increase in RMD age from 70.5 TO 72
Contributions allowed to Traditional IRS past age 70.5: This is effective beginning with tax year 2020. Earned compensation remains a requirement to make an IRA contribution.
New exemption from the 10% early distribution penalty: This is for expenses up to $5,000 related to the birth or adoption of a child.