Understanding CARES Act: Financial Relief for Coronavirus-Related Hardships
The CARES Act provides financial relief for individuals facing coronavirus-related hardships such as quarantine, job loss, or reduced work hours. This act allows for coronavirus-related distributions from retirement accounts, with options for repayment and penalty waivers. Business owners and those impacted by COVID-19 can benefit from this legislation until December 30, 2020.
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Coronavirus Aid, Relief and Economic Security Act (CARES Act) MetLife Resources June 2020
CARES Act Legislation The Structure of the Law On March 27, 2020 the Coronavirus Aid, Relief and Economic Security (CARES - P.L. 116-136) Act passed the House of Representatives by a voice vote, the President then signed the bill into law. 2 Coronavirus Aid, Relief and Economic Security Act
Coronavirus-Related Distributions Relief is offered through to December 30, 2020 Eligible Retirement Accounts* Additional Information The CARES Act provides for coronavirus-related distributions for amounts up to $100,000 from an individual s available vested account balance without regard to the normal withdrawal restrictions. Profit Sharing Distributions can be paid back to any account that accepts rollovers. The IRS will issue additional guidance. Money Purchase** 403(b) The CARES Act does not apply to nongovernmental 457(b) plans, nonqualified annuities and annuitized contracts. 401(k) 457(b) Governmental IRAs Retirement plans must amend the plans to incorporate act by the end of plan year commencing in 2022, 2024 for Gov t plans. *Most plans. **A money purchase pension plan is not permitted to make a distribution before an otherwise permitted distributable event merely because the distribution qualifies as a coronavirus-related distribution. 3 Coronavirus Aid, Relief and Economic Security Act
Coronavirus-Related Distributions You have experienced adverse financial consequences because you have been quarantined, furloughed, laid off, or have had work hours reduced due to the coronavirus. You, your spouse, or dependent has been diagnosed with the coronavirus (i.e., SARS-CoV-2 or COVID-19). Diagnosed with virus Financial Loss* Common theme or goal here You own or operate a business and have had to close or reduce hours due to the coronavirus You are unable to work because of a lack of childcare due to the coronavirus. Business Owners Unable to work *You have experienced an adverse financial consequence due to other factors as provided in guidance issued by the Internal Revenue Service. Note: Covid19 distributions are not considered a hardship under the IRC. 4 Coronavirus Aid, Relief and Economic Security Act
Coronavirus-Related Distributions Rely on a certification by individuals 10% early withdrawals penalty waived 3-Years repay period Qualifications must apply to at least one of the distribution rules Waived for coronavirus- related distributions Allowed to repay the distribution back to their plan or account as a tax- free rollover Pay the federal income tax on the distribution ratably over a three-year period 5 Coronavirus Aid, Relief and Economic Security Act
Coronavirus-Related Loan Relief Available to plans through September 22, 2020 Loan Relief Limits Loan Qualifications Loan Repayments Plan sponsors are permitted to rely on a certification by participants that they qualify for loan relief. If a plan does not permit loans, an amendment would be needed to add a loan provision. Plan sponsors can increase number of loans available under the plan for all participants. If a participant maxes out the number of loans available under a plan and they cannot take advantage of a COVID-19 loan. The CARES Act provides that eligible participants can take loans up to the lesser of $100,000 or 100 percent of their available vested account balance. Available to new loans made during the 180-day period following the enactment of the CARES Act. The suspension period is to be added to the original loan term when repayments, including accrued interest, resume, regardless of the length of the loan s original term. Individuals with outstanding loans with a repayment due from the date of enactment of CARES through to December 31, 2020 may delay loan repayments for up to one year.* *This relief expires on December 31, 2020. 6 Coronavirus Aid, Relief and Economic Security Act
CARES Act Legislation Required Minimum Distributions (RMDs) The CARES Act provides for a waiver of required minimum distributions due in calendar year 2020 from most defined contribution plans and IRAs. This applies to both 2020 tax year and for tax year 2019 if not taken in 2019 (e.g., age 70 in 2019) Participants can elect to receive distributions that would otherwise be RMDs in 2020 but may be subject to contract withdrawal penalties. Coding on IRS Form 1099-R(s) will not change and will reflect that the tax penalty does apply. 7 Coronavirus Aid, Relief and Economic Security Act
Plan Amendments Plan Sponsor decides to amend plan Optional Distributions and loans Immediate Adopting provisions The last day of the first plan year beginning on/after January 1, 2022 Deadline Coronavirus Aid, Relief and Economic Security Act
CARES Act Legislation - References Questions? CARES Act If you have any questions, reach out to your Relationship Management Team Read the full CARES Act 9 Coronavirus Aid, Relief and Economic Security Act L0620005247[exp0721][All States][DC]
