Retirement Provisions Due to Coronavirus
April 2, 2020 | Symphona
We hope that you are keeping yourself, your loved ones, and your community safe from COVID-19 (commonly referred to as the Coronavirus). Along with those paramount health concerns, you may be wondering about some of the recent tax changes meant to help everyone coping with the Coronavirus fallout. We want to update you on the retirement-related provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, Congress’s gigantic economic stimulus package that the President signed into law on March 27, 2020.
Qualified Retirement Plan Loans
Persons who (or whose family) is infected with the Coronavirus or who is economically harmed by the Coronavirus (a qualified individual) are eligible to withdraw up to $100,000 from IRAs and defined contribution plans (such as 401(k) plans) without the additional 10% tax on early distributions for distributions made between January 1 and December 31, 2020. These distributions may, subject to guidelines, be re-contributed to the plan or IRA. Distributions that are not repaid are treat as income spread out over three years unless the employee elects to turn down the spread out.
Employers may amend defined contribution plans to provide for these distributions. Additionally, defined contribution plans are permitted additional flexibility in the amount and repayment terms of loans to employees who are qualified individuals. Further, plan administrators are not to withhold 20% on distributions.
Required Minimum Distributions
Required minimum distributions (RMD) that otherwise would have to be made in 2020 from defined contribution plans (such as 401(k) plans) and IRAs are waived. This includes distributions that would have been required by April 1, 2020, due to the account owner’s having turned age 70 1/2 in 2019. There is no hardship requirement to defer 2020 RMD payments.
For RMD distributions already received in 2020 and are still within the 60-day rollover period, the distribution amount is eligible to be returned to the retirement plan. Contact your plan administrator to defer payments or rollover distribution received in the past 60-days.
For more information you can visit this helpful summary on the AARP website here: https://www.aarp.org/money/investing/info-2020/cares-act-retiree-tax-benefit.html
Information updates are regularly posted the IRS web site at: