CARES Act Expands U.S. Retirement Plan Access and Provides Additional Relief and Changes to Employer-Provided Benefits
March 26, 2020
Authored by: Steve Evans and Lisa Van Fleet
The Coronavirus, Aid, Relief and Economic Security Act (“CARES Act”) provides legislative relief to participants impacted by the Coronavirus pandemic. A summary of key provisions of the CARES Act, based on the current draft, is included below. These provisions are, of course, still subject to approval by both houses of Congress and the President’s signature.
Provisions Applicable to Retirement Plans
Tax-favored coronavirus-related distributions (“CRD’s) which do not exceed $100,000 will not be subject to the 10% early distribution tax. A CRD means any distribution from a plan made on or after January 1, 2020 and before December 31, 2020 to an individual who is one of the following:
- An individual who is diagnosed with COVID-19 or SARS-CoV-2;
- An individual whose spouse or dependent is diagnosed with COVID-19 or SARS-CoV-2; or
- An individual who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, experiencing a reduction of work hours, inability to work due to lack of child care caused by COVID-19 or SARS-CoV-2, the closing or reduction of hours by a business owned or operated by such participant due to COVID-19 or SARS-CoV-2, or other factors determined by the Treasury Secretary.
Notably, the plan administrator may rely on the individual’s certification that he/she has experienced a CRD. Tax on the CRD shall, unless the individual elects to the contrary, be spread pro-rata over a three year period. The individual may repay the CRD to the plan without regard to contribution