How the CARES Act Applies to Your Retirement Plan
The Coronavirus Aid, Relief and Economic Security (CARES) Act includes provisions that may apply to your retirement plan. Here are some important highlights to know first.
CORONAVIRUS-RELATED DISTRIBUTIONS (CRD)
A plan participant may take a coronavirus-related distribution (CRD) of up to $100,000 any time in calendar year 2020 based on any of these events:
A participant experiences adverse financial consequences as a result of quarantine, furlough, being laid off, having work hours reduced, closing of business, or other factors as determined by the Secretary of the Treasury.
The administrator of the plan may rely on the individual’s certification that the individual qualifies for a coronavirus-related distribution under these categories.
Withholding tax and early withdrawal penalties are waived
The 10% early withdrawal penalty (if under age 59 1⁄2) is waived.
A CRD may be re-contributed or rolled over
Taxation on a distribution not recontributed
A TEMPORARY INCREASE IN PLAN LOAN LIMITS
The CARES Act temporarily allows a participant who meets the same requirements as for coronavirus-related distributions to take an increased loan. This is available for 180 days beginning March 27, 2020.
Relaxed Loan Repayment Provisions
Participants with an outstanding plan loan with a repayment due from the date of the CARE Act’s enactment through Dec. 31, 2020 can delay their loan repayment(s) for up to one year. This is available for any loan whether coronavirus-related or not.
The 5-year loan repayment period can also be extended for one year, but interest will continue to accrue during the delayed repayment period.
2020 REQUIRED MINIMUM DISTRIBUTIONS (RMDS) WAIVED
Required Minimum distributions (RMDs) from defined contribution plans for calendar year 2020 need not be made. This waiver applies to defined contribution 401(a) qualified plans, defined contribution 403(a) and 403(b) plans, governmental defined contribution 457(b) plans, and IRA’s.*
*Please note that this waiver does not apply to Defined Benefit or Cash Balance plans.
This information is provided for informational purposes and applies to many, but not all qualified retirement plans. Please contact us to discuss the details of the CARES Act and how it may apply to your plan. We’re here to help.
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