CARES Act Relief for Retirement Investors Affected by COVID-19

Provisions Make it Easier to Withdraw Money from Retirement Accounts

On March 27, 2020, President Trump signed a historic stimulus bill into law that became effective immediately. The Coronavirus Aid, Relief and Economic Security (CARES) Act provides relief for retirement plan investors affected by COVID-19. The CARES Act also provides 2020 required minimum distribution (RMD) relief for participants and beneficiaries in individual retirement accounts or annuities (IRAs) and defined contribution plans (including 401(a) plans, 403(b) plans, and governmental section 457(b) plans). This RMD relief is not limited to individuals affected by the coronavirus.

We’re here to support you through these changes and are actively working to keep you updated as we learn more.
 
Here is a summary of key CARES Act provisions:
 
Penalty-free distributions from retirement accounts
The CARES Act permits eligible individuals to take “coronavirus-related distributions” (CRDs) from retirement plans. Up to $100,000 can be withdrawn from an IRA, a qualified plan (including 401k plans), a 403(b) plan or a 457(b) governmental plan as a coronavirus-related distribution in 2020 with the 10% premature distribution penalty waived. CRDs must be made between January 1, 2020, and December 31, 2020. This applies to a participant, spouse or dependent who is diagnosed with the virus or experiences adverse virus-related financial consequences including quarantine, furlough, layoff or reduced work hours, lack of childcare, closing or reduced hours of a business owner/operator. Income tax on the taxable portion of the distribution may be spread over a three-year period.
 
Repayment of distributions
A coronavirus-related distribution may 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.
 
Increased loan limits
Loans are also permitted for COVID-19-affected investors, with the loan limit increased to the lesser of $100,000 or 100% of the non-forfeitable account balance for 180 days after enactment of law. Loan repayments due between the date of enactment through Dec. 31, 2020, may be delayed for one year or, if later, one year after the enactment.  

Required minimum distributions waived for 2020
The law provides a temporary waiver of required minimum distribution requirements and suspends RMDs from defined contribution plans, 403(b) plans and 457(b) governmental plans for 2020. This applies to any distribution required to be made in calendar year 2020 because of a required beginning date in 2020 or because the distribution was not made before Jan. 1, 2020. Beneficiaries receiving distributions over a 5-year or 10-year period can waive the distribution for 2020. This RMD relief is not limited to individuals affected by the Coronavirus​.

For example, a participant who attained age 70 ½ in 2019 normally would have a “required beginning date” of April 1, 2020. With the waiver provided by the CARES Act, such a participant would not be required to receive an RMD in 2020. However, if the participant received an RMD in 2019, the RMD characterization of the 2019 distribution cannot be changed.​

Single employer defined benefit plan minimum funding relief
Single employer defined benefit plans have until Jan. 1, 2021, to meet the minimum funding requirements for contributions due during 2020.

Separate from the CARES Act, the IRS issued guidance providing delayed tax filing and payment deadlines to July 15th for taxpayers with an April 15 deadline. The deadline to make contributions to an individual retirement account (IRA) for 2019 is postponed to July 15, 2020. The delay to July 15, 2020 also applies to a payment of the 10% early distribution penalty if applicable.

If you have any questions or need specific guidelines, fee free to contact us anytime.