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Update for Retirement Plan Sponsors

We are all trying to acclimate to our new reality and find the most effective ways to protect our families, friends and businesses through this crisis. In that spirit, we wanted to reach out to remind you that your retirement team is here to serve as a resource through this challenging time. Whether you’d like to review your investment allocation, discuss ways to access funds or just need someone to engage and reassure your employees – we are here and ready to assist.

As you may know, the Cares Act was recently signed into law and it will provide several meaningful benefits for retirement plan participants. These include several provisions that will make it easier for plan participants to access funds during this time. Here are a few highlights:

Hardship Distributions: The CARES Act waives the 10% early withdrawal penalty tax under Internal Revenue Code Section 72(t) on early withdrawals up to $100,000 from a retirement plan or IRA for an individual who:

  • is diagnosed with COVID-19;
  • whose spouse or dependent is diagnosed with COVID-19; 
  • who experiences adverse 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.

The legislation also permits those individuals to pay tax on the income from the distribution over a three-year period and allows individuals to repay that amount tax-free back into the plan over the next three years. Those repayments would not be subject to the retirement plan contribution limits.

Plan Loans: The act doubles the current retirement plan loan limits to the lesser of $100,000 or 100% of the participant’s vested account balance in the plan. Individuals with an outstanding loan from their plan with a repayment due from the date of enactment of the CARES Act through Dec. 31, 2020, can delay their loan repayment(s) for up to one year. 

Plan Amendments: The legislation further permits retirement plans to adopt these rules immediately, even if the plan does not currently allow for hardship distributions or loans, provided the plan is amended on or before the last day of the first plan year beginning on or after Jan. 1, 2020, or later if prescribed by the Treasury Secretary. 

You’ll find more details and a list of frequently asked questions regarding the Cares Act here for your reference.

If you have any questions or need any assistance regarding your retirement plan please reach out to Rich, Joe or Crystal directly.