In News & Commentary

CARES Act and Your Retirement Plan

March 27, 2020, Congress passed The Coronavirus, Aid, Relief and Economic Security (CARES) Act.   It includes important, impactful relief available to your plan and participants.

CARES provisions are optional where noted and our office recommends plan sponsors only add relief provisions as specific need arises.

Qualifying Coronavirus-Related Distributions (Optional – Amendment Required):

  1. Allows up to $100,000 distribution during the 2020 calendar year for those affected by the Coronavirus.
  2. The distribution is not subject to the 10% early withdrawal penalty if under age 59 ½, but is taxable and does reduce the participant’s retirement benefits.
  3. Qualifying participants include anyone:
  • diagnosed with COVID-19,
  • who has a spouse and /or dependent diagnosed with COVID-19,
  • suffering adverse financial consequences as a result of being quarantined, furloughed, laid off, having reduced work hours due to COVID-19, unable to work due to lack of child care, or the closing or reducing hours of the business owned by the individual due to COVID-19 or any other factor determined by the Treasury Secretary.
  1. Participants have the ability to repay the amount withdrawn within three years of the date the distribution is received to the plan from which it was distributed or to any other plan or IRA that can accept rollovers.
  2. Income tax on the distribution may be paid over a three-year period to the extent that distribution is not repaid.
  3. Plans may rely on employee self-certification that they meet one of the above criteria.

Relaxing of Loan Provisions (Optional – Amendment Required):

  1. Increases the maximum loan amount available from $50,000 to $100,000 and from 50% to 100% of the participants vested balance during the 180-day period ending September 24, 2020.
  2. Provides for a one-year extension to the due date of a participant loan repayments otherwise due between March 27, 2020, and December 31, 2020. However additional interest will accrue and the loan repayment schedule must be re-amortized to reflect the increased interest and repayment period.
  3. Only qualifying participants (as defined above) may utilize these relaxed loan provisions.

Retirement plans are permitted to adopt these rules immediately, even if the plan does not currently allow for hardship distributions or loans, provided the plan is amended on or before the last day of the first plan year beginning on or after January 1, 2022.

Waiver of 2020 Required Minimum Distributions (RMD) (No Amendment Required):

  1. Participants subject to required minimum distributions may suspend their required distributions for 2020, allowing time to recoup losses (includes IRAs as well).
  2. If an RMD has already been received during 2020, then the participant may roll it over and defer paying taxes, including rolling back into the plan.

For participants who turned 70 ½ in 2019 with a Required Beginning Date of 4/1/2020:

  • But have not yet taken the distribution, then no distribution is required in 2020 (for the 2019 distribution year).
  • And have a distribution taken after 12/31/2019, it is subject to the waiver for 2020 and the amount can be rolled over.
  • And the distribution was taken in 2019, no relief is available.





We encourage you to reach out to our office to discuss this important legislation.