This is the way I understand it and YMMV. This is an example only and is not legal or tax advice!
It might be easier to understand using numbers as an example.
$750 is taken out of account A. Leaving a balance of $250.
At the three year deadline, $750 must have been returned to A so that all of the money removed brings the balance back up to the original $1000 in the account.
If account A has additional contributions taken from wages (say $10 per month for a total of $120 for each year), that isn't considered repayment.
At the end of three years, the total back in A has to be $250 balance after covid withdrawal + $750 covid withdrawal repayment + $120 yr 1 additional contribution + $120 yr 2 additional contribution +$120 yr 3 additional contribution for a total of $1360.
If the entire $1000 is removed from A for account closure, then the total distribution is $1000.
If A is shut down and rolled over to another tax deferred roll-over eligible account (B), then the original $750 gets returned to B. Hence B better have $1360 of tax deferred money. Either way, the amounts have to be made whole as if the money was never removed.
Simplistically, money that gets removed EARLY from a tax deferred account, is a taxable distribution. With covid, that is being "paused" to allow money to be used and then returned within the deadline.
