Potential 3 Year Indirect Rollover Period and 10% Penalty Avoidance on Qualifying Distributions From Retirement Plans – H.R. 748 SECTION 2202

Dec 7, 2020

10% Penalty for early withdrawal {I.R.C. §72(t)} shall not apply to COVID-19 related distributions

COVID-19 related distributions are :

1) distributions not exceeding $100,000 between January 1, 2020 and before December 31, 2020

AND

2) to an individual with a SARS-CoV-2 diagnosis for the individual, the spouse, or dependent,

OR

3) to an individual who experiences adverse financial consequences as a result of :

  1. being quarantined,
  2. being furloughed or laid off, or having work hours reduced due to such virus
  3. being unable to work due to lack of child care due to such virus
  4. closing or reducing hours of business owned by the individual due to such virus

 

You can choose to include this distribution in your income ratably over a three year period and it is not subject to the the 10% early distribution penalty.

Alternatively, you may contribute back the entire amount withdrawn, in one or more contributions, over the THREE year period starting with the date you received the first distribution and it will be treated as an indirect rollover of those funds if they were an IRA or as a trustee to trustee transfer if it was another eligible employer retirement plan.

Source : H.R. 748 Section 2202, pages 157 – 167

 

Archived from the Hot Topics page.. originally published 04/04/2020.