Retirement Money Access and the CARES Act for Covid-19 (Coronavirus)

April 13, 2020

The 2.2 Trillion Dollar Stimulus Package known as the CARES ACT offers a NEW DISTRIBUTION OPTION for eligible RETIREMENT PLANS.   

Eligible retirement plans may offer distributions of up to $100,000 (for loans made before September 23. 2020) to “qualified individuals” for the 2020 tax year.  The distributions are exempt from the normal 10 percent penalty for those under age Fifty-Nine and a half (59.5). 

If the loan is repaid within a three-year period (beginning on the date following receipt of the distribution) then distribution is not taxable.  To qualify you must receive your distribution before Dec. 31, 2021.

A qualified individual is an individual that satisfies one of the following:

  1. A participant has been diagnosed with COVID-19 by a test approved by the Centers for Disease Control and Prevention (CDCP).
  2. A participant’s spouse or dependent has been diagnosed with COVID-19 by a test approved by CDCP.
  3. Due to COVID-19, a participant has experienced adverse financial consequences due to being quarantined, furloughed or laid off, unable to work due to lack of child care as a result of COVID-19, or having their hours reduced, or the closing or reduction of hours of a business owned or operated by the individual.
  4. Other factors, as determined by the Secretary of the Treasury in future guidance.

Employers are not required to ascertain whether a participant satisfies one of the conditions set forth above. Instead, the employer can rely on the employee’s self-certification.

The Repayment of Existing Loans (made prior to March 27, 2020) for a qualified individual  may be delayed for one year.  Making the total repayment over a six (6) year period rather than the normal five (5) year period.  Interest will accrue.   

Required Minimum Distributions are waived for certain retirement plans (defined contribution 401(a), 403(b), 457(b) plans and IRAs) for calendar year 2020. The waiver applies to 2020 RMDs that are required to be made by April 1, 2021 and certain 2019 RMD's that were to be made prior to April 2020. If an RMD has already occurred, a participant may be able to roll over the distributed amount into an IRA or back into the retirement plan from which it was paid.