The Coronavirus Aid, Relief, and Economic Security Act (CARES) brings changes and relief to eligible retirement plans for qualifying emergencies and adverse financial consequences related to the current pandemic.
Certain highlights of the Cares Act include:
- The CARES Act relaxes early distribution rules allowing distributions up to $100,000, waiver of the 10% early withdrawal penalty for distributions prior to age 59-1/2, and elimination of the mandatory 20% federal tax withholding.
- The CARES Act enhances loan rules allowing an increase in the loan limit from $50,000 to $100,000, and in accordance with the Plan, for loans made from March 27, 2020 through September 22, 2020 and suspension of loan payments due March 27, 2020 through December 31, 2020 for up to one year.
- The CARES Act suspends required minimum distributions (RMD) for 2020, participants whose first RMD was required in 2019 but who did not take it would not be required to take their 2019 RMD or their 2020 RMD.
These new rules can be adopted immediately for all plans. A plan amendment will be required but can be retroactively applied as long as the amendment is in effect by the last day of your plan’s year end beginning on or after January 1, 2022.
For more information please call our Employee Benefit Plan Audit specialists at (518) 456-6663.