Updated June 23, 2020
[Text in BOLD below are updates reflecting IRS Notices 2020-50 and -51]
On March 27, 2020, the Coronavirus, Aid, Relief, and Economic Security (CARES) Act (the “Act”) was signed into law. A portion of the Act is intended to loosen access to retirement plan funds and provide relief for individuals impacted by the COVID-19 pandemic. The following is a summary of the retirement-related provisions of the Act:
The following is a summary of the retirement-related provisions of the Act:
- Coronavirus-related distribution (CRD)
- Waiver of 10% penalty on early withdrawals for amounts up to $100,000 from a retirement plan or IRA taken between January 1, 2020 and December 31, 2020 (so can be retroactively applied to distributions taken prior to enactment of the Act)
- CRDs are only available to a qualified individual (see “qualified individual” below)
- Individuals may elect to pay the tax on a CRD ratably over a three year period (permitted to elect to include entire CRD in income in year of distribution); if elects to include entire CRD in year of distribution and later recontributes any amount the individual must use Form 8915-E and file an amended return; and
- Individuals may elect to repay the CRD back to the plan, tax-free, over the three years from the date of the withdrawal (not limited by plan limits). May be repaid back into the plan allowing the withdrawal, another qualified plan or an IRA that accepts rollovers. CRD will be treated as though repaid in a direct rollover. Repayment does not count towards the single rollover per year limitation. If plan does not allow for rollovers it is not required to accept recontribution. Plan administrator permitted to rely on qualified individual’s certification (see “qualified individual” below) as whether recontribution meets CARES Act rules for CRD unless possesses actual knowledge to the contrary.
- Plan sponsor has discretion whether to offer this design, with modifications (if so desired and their service provider can accommodate), in their qualified plan
- Act does not limit a CRD to active employees (should check with service provider if they will allow CRDs to terminated participants)
- Coronavirus-related distribution (CRD)
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[SECURITIES DISCLOSURE] ACR# 352153 6/20
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