Stimulus Bill Eases Restrictions on IRAs, 401Ks and Similar Retirement Accounts


The stimulus bill that was passed by the House of Representatives and signed into law on March 28, 2020 included provisions that temporarily ease restrictions on several types of retirement accounts (IRAs, 401Ks, 403Bs and similar accounts).

A March 27, 2020 Bloomberg article summarizes the provisions, which include provisions to delay required minimum distributions (RMDs) until 2021, the ability to withdraw money early from retirement accounts without tax penalties, and the ability to take out loans of up to $100,000 from retirement accounts instead of the current loan limit of $50,000.

The provision of most interest to CSU retirees is likely the option to delay RMDs until 2021.

When a retiree reaches the age of 70.5 he or she is required to take an RMD by April 1st of the following year and an RMD every year thereafter.

For 2020 the amount of the RMD would be based on both the age of the retiree and the value of the person's retirement account at the end of 2019. However, with the recent sharp declines in financial markets owing to the corona virus situation, many retirement accounts have declined significantly in value. The provision in the new stimulus bill allows the retiree to delay taking an RMD until 2021, and would base the amount on the age of the retiree and the value of his or her retirement account at the end of 2020.

This provision would be of benefit to many people currently required to take RMDs from their retirement accounts; however, since everyone's financial situation is different talk with your financial adviser before deciding to delay your RMD until 2021.