The Coronavirus, Aid, Relief and Economic Security (CARES) Act Will Benefit Retirement Plan Participants
Congress has passed and the President has now signed a $2.2 trillion stimulus package, which includes sending checks directly to individuals amid the COVID-19 crisis.
The Coronavirus, Aid, Relief and Economic Security (CARES) Act [H.R. 748] includes several adjustments to the rules that apply to retirement plans. Here are some of the highlights that could apply to plan participants.
How Will These Changes Benefit Your Participants?
Up to $100,000 can be withdrawn, without incurring the 10% early withdrawal penalty, from an IRA or qualified plan as a coronavirus-related distribution made in 2020 if a participant (or their spouse/dependent) is diagnosed with COVID-19 or experiences adverse financial consequences due to the pandemic.
Additionally, this distribution will not be subject to the 20% withholding and notice rules.
Repayment of Distributions
A COVID-19 related distribution can be repaid within three years of the date of distribution and may be made in increments not to exceed the amount of the distribution that would otherwise be eligible for rollover.
Repayments of plan distributions made directly to qualified retirement plans and IRAs within three years of a COVID-19 related distribution will be treated as a direct trustee-to-trustee transfer.
If available within the plan, loan limits will increase from the lessor of $50,000, or 50% of the account balance, to the lessor of $100,000, or 100% of the account balance, of the participant’s vested account balance if the loan is made during the 180 days after enactment of the law. (The availability of this loan limit increase expires on September 22, 2020.)
Loan payments on existing loans due between the date of enactment to Dec. 31, 2020, may be delayed for one year, however this will be subject to plan approval. Like hardship distributions, these loan provisions only apply if you are a (or their spouse/dependent) is diagnosed with COVID-19 or experiences adverse financial consequences due to the pandemic. Participants should check with their employer or plan administrator to ensure this option is available under their plan.
Required Minimum Distributions (RMDs)
A temporary waiver of RMDs will be provided to eligible participants affected by COVID-19, while also suspending RMDs for 2020.
Security Benefit remains committed to you during these challenging times. For more information, contact your financial professional or Security Benefit at 800.888.2461.
Security Benefit does not provide accounting, legal, or tax advice and nothing contained herein should be construed as such advice. Please consult your own accounting, legal, or tax advisor.