Mid-Year Updates: IRA and PPP Rules | SJS Investment Services

Mid-Year Updates: IRA and PPP Rules

July 9, 2020

By Jennifer Smiljanich.

In the current economic environment, the federal government has stepped in with the CARES Act legislation and other stimulus to help provide greater financial flexibility for Americans.  In the last few weeks, there have been two additional rulings that intend to offer help to those needing relief.  Below, we offer a summary of how those rulings may affect you. As always, please be sure to check in with your tax professional for guidance.


IRA Distribution Relief, Part 2

Earlier this year, the CARES Act allowed individuals who would be required to take a distribution from an IRA or defined contribution retirement plan in 2020, to avoid taking any withdrawals.  In Notice 2020-51 issued on June 23rd, the IRS offered further relief regarding Required Minimum Distributions (RMDs).

First, the 60-day rollover period for any RMDs already taken this year has been extended to August 31.  This extension will allow more taxpayers to take advantage of this relief. Second, Notice 2020-51 directs that any IRA owner or beneficiary who has already received a distribution from an IRA of an amount that would have been an RMD in 2020 can repay the distribution to the IRA by August 31.1  

For those individuals who took IRA distributions early in the year or who took distributions as beneficiaries of inherited IRAs, this guidance offers the option to return all or part of those distributions by August 31.  More flexibility is certainly good news and offers a “fair and favorable outcome” to those who took distributions in compliance with the rules early in the year.2


Paycheck Protection Program Flexibility Act of 2020

On June 5, 2020, the Paycheck Protection Program Flexibility Act (PPPFA) was signed into law, amending the CARES Act.  Among its provisions, the PPPFA offers greater latitude to the millions of businesses that applied for Paycheck Protection Program (PPP) loans, as follows:3

  • Extended covered period for PPP loan forgiveness from 8 weeks to the earlier of 24 weeks or December 31, 2020.  Borrowers who received loans before June 5 may extend or keep the original 8-week period.
  • Reduced the requirement that payroll costs make up 75% of covered loan amount to 60% in order to receive loan forgiveness.
  • Increased PPP loan maturity from a minimum of 2 years to 5 years for loans originating after June 5, 2020.   
  • Extended safe harbor deadlines from June 30 to December 31 to restore any reductions in salaries or hourly wages, or full-time equivalency levels.
  • Amended reduction in loan forgiveness associated with staff levels.  The PPPFA added flexibility if Borrowers could document an inability to re-hire or hire qualified employees; or could document an inability to return to similar business operations as of February 15, 2020 due to compliance with COVID-19 restrictions.
  • Allowed borrowers receiving loan forgiveness to also defer payroll tax payment per CARES Act provisions. 

Please know that your SJS team is here to help guide you through these ever-changing and difficult times. Please feel free to reach out to us with any questions.


Important Disclosure Information 

SJS Investment Services does not provide legal or tax advice. Please consult your legal or tax professional for specific advice. This material has been prepared for informational purposes only.

1 IRS Extends RMD Rollover Relief Under CARES Act.” Melanie Waddell, 23-Jun-2020, thinkadvisor.com

2New Rollover Rules For Unwanted 2020 RMDs Under IRS Notice 2020-51… Welcome Relief And A Troubling Precedent.” Jeffrey Levine, 25-Jun-2020, www.kitces.com.

3Paycheck Protection Program – Where are we Now?  An Up-to-Date Guide to the Paycheck Protection Program.”  Proskauer, 24-Jun-2020, proskauer.com.