The CARES Act

Coronavirus, Aid, Relief And Economic Security (CARES) Act.

Information provided by the American Retirement Association
Amidst the ongoing COVID-19 crisis, the American Retirement Association has been working diligently to push for commonsense solutions that provide Americans with the funds necessary to provide for themselves and their families while at the same time protect the private employer-sponsored retirement system.

The Coronavirus, Aid, Relief and Economic Security (CARES) Act, just signed into law by President Trump, includes several key provisions that ARA believes will positively impact retirement plan participants and plan sponsors. The following FAQs highlight some of the most salient relief measures.

Are plan participants impacted by COVID-19 able to access their retirement funds?
Yes, if allowed by the plan, certain participants may withdraw, penalty free, up to $100,000 between January 1, 2020 and December 31, 2020.

Who is eligible for these withdrawals?
To be eligible to make such a withdrawal, the individual participant, or his or her spouse or dependent, must have been diagnosed with COVID-19, or the individual suffered adverse financial consequences due to COVID-19

(e.g., furlough, reduction in hours, unable to work due to childcare, loss of business, etc.).

Have participant loan limits been adjusted?
Yes.  If allowed by the plan, the loan limit can be increased to the lesser of $100,000 or 100% of the participant’s vested account balance. This only applies to loans made on or before September 23, 2020 (180 days following enactment of CARES) and is only for individuals that meet the same conditions outlined for the withdrawals noted above.

What about outstanding loans?
Subject to plan approval, scheduled participant loan repayments due from March 27, 2020 (the enactment of CARES) through December 31, 2020, may be delayed for up to one year for qualifying employees. Interest continues to accrue during the period and the plan can extend the term of the loan for up to one year.

Can a participant who receives a COVID-19 distribution repay the amount into a qualified retirement plan?
Yes, the participant has three years from the day after the distribution was received to repay the amount into a qualified retirement plan (or any other plan or IRA that can accept rollovers). The distribution will be taxable if it’s not repaid, but it can be repaid over a three-year period, unless otherwise elected.

Does the plan sponsor need to verify whether an individual qualifies for a COVID-19 withdrawal or loan?
No, the plan sponsor may rely on participant’s certification for eligibility.

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