The passage of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) has created additional challenges for those managing their organizations’ unclaimed property compliance program when determining dormancy on potentially reportable retirement accounts.
The 800-plus page CARES Act includes a provision for Required Minimum Distribution (RMD) relief for retirees and beneficiaries in 2020. (See Section 2203. Temporary Waiver of Required Minimum Distribution Rules For Certain Retirement Plans and Accounts). This could translate to a one- year delay of dormancy for many account holders who would have been required to take their first RMD in 2020. The CARES Act also impacts beneficiaries of deceased account holders whose accounts were being drawn down under the “5 year rule,” effectively delaying dormancy another year due to the waiver of RMD requirements in 2020.
Coupled with the upward revision in RMD age, from 70.5 to 72, by the 2019 Setting Every Community Up for Retirement Enhancement Act (SECURE Act), the first few months of 2020 have seen quite a bit of movement for retirement accounts legislatively. The Act also has adjusted the RMD Death provision to a “10 year rule” for most non-spouse beneficiaries.The SECURE Act and the CARES Act are requiring significant amounts of temporary and permanent processing and logic changes to systems and software which analyze retirement accounts at a time where many are working remotely and from temporary offices in order to meet safe-distance requirements due to the COVID-19 pandemic impact.
Another conflict arises between statutory unclaimed property language and the new Acts. A number of states, including those that have recently passed their version of the 2016 Revised Uniform Unclaimed Property Act (RUUPA), expressly use 70.5 in the language regarding the date of dormancy for accounts requiring RMD’s. Vermont corrected for this difference before their RUUPA bill was enacted but the remaining RUUPA states and other states still list 70.5 in their statutes. These states will need to adjust their statutes and provide advice to firms on how to address the discrepancy between their laws and federal laws in the interim as it is a grey area subject to interpretation.
If you are currently working to implement these updates within your organization and have questions, we encourage you to Contact Us to set up a no-cost consultation and learn about available options. A professional advisor has the expertise and knowledge to help holders understand and navigate the complex challenges of these legislative changes.
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