The CARES Act allowed us to waive year-2020 required minimum distributions (RMDs) for all TSP participants who would otherwise have been subject to them. This included participants for whom 2020 would have been their first RMD year, even though that distribution would not have been due until April 1, 2021. RMDs have not been waived for 2021 however.
Questions and answers about RMD changes
Q: I chose to receive installment payments based on life expectancy so that I could withdraw exactly my RMD amount each year. Because of the waiver of 2020 RMDs, I stopped these payments. Can I restart these these payments now that RMDs are required again starting in 2021?
Answer: Yes. We permanently changed the rule that prevented you from starting installment payments based on life expectancy if you have previously received installment payments. All TSP participants who are eligible for installment payments may elect to receive installment payments based on life expectancy whether or not they previously started and then stopped installment payments.
Q. Were 2020 RMDs just being postponed or were they canceled? Will I have to receive two RMDs in 2021?
Answer: RMDs were waived for 2020, which means they were effectively canceled. You do not have to receive two RMDs in 2021. This is true even if 2020 is your first RMD year and, therefore, not required until April 1, 2021. If 2020 would have been your first RMD year, the first RMD you have to take will be for your second RMD year (2021) and is due December 31, 2021.
Q. What if I’ve already received a required minimum distribution in 2020 and it was more than 60 days ago? Can the TSP extend the 60-day deadline for rollovers?
Answer: If you received an RMD (or an installment payment that included an RMD) between January 1 and May 15, then you were allowed to roll those amounts over up until August 31, 2020. If you missed that deadline and were affected by COVID-19, see Withdrawals and repayments for rollover options.
Q. I received a 1099-R that reported the RMD I received in 2020. But I repaid (or rolled over) the RMD before the deadline established by the CARES Act. Will I receive a corrected 1099-R to show that I repaid it?
Answer: No. If you received a required minimum distribution (RMD) from your TSP account in 2020, we must report the income and send you a Form 1099-R even if you rolled the money back into your account or into another retirement account under the terms of the CARES Act. You may have already received the 1099-R. You should not expect a “corrected” 1099-R. Remember that not all reported income is taxable income. If you received an RMD that was eligible for rollover in 2020 and you repaid it or rolled it over by the deadline, then it’s not taxable income. Please consult the IRS or a tax adviser for instructions and additional information on tax filing.