On March 27, the House of Representatives passed the third piece of emergency legislation Congress has developed in response to the novel coronavirus. The Senate cleared the bill, the Coronavirus Aid, Relief, and Economic Security Act, or “CARES Act,” on March 25.
The CARES Act includes provisions intended to provide relief to retirement plan participants and retirees, including government sponsored 457(b), 403(b), 401(a)s and 401(k), 403(b) plans.
Similar to the relief offered in previous disasters, Section 2202 of the bill provides special rules for the use of retirement funds in the current emergency. It waives the 10 percent early withdrawal penalty for distributions up to $100,000 from qualified retirement accounts for coronavirus-related purposes made on or after Jan. 1, 2020. These emergency distributions may be repaid within three years and regular income taxes on the distributions may be spread over three years.
The emergency distributions can be made from the date the bill is enacted through the end of the year to anyone who is diagnosed with COVID-19, or whose spouse or dependent is diagnosed, or who experiences financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to COVID-19, or other factors as determined by the Treasury Secretary.
Section 2203 of the bill waives all required minimum distributions (RMDs) for the 2020 calendar year. This provision applies to governmental 457(b), 403(b) and 401(k) plans.
NAGDCA joined 24 retirement stakeholder organizations and businesses calling for these changes.
Click here for the full legislative text of the CARES Act.
Click here for a section-by-section summary of the CARES Act.
Click here to see the retirement sector letter to Congress.