Legislative Updates, CARES Act of 2020
CARES Act is the stimulus legislation passed to address the economic damage created by the shutdown of the country to deal with the Coronavirus. The CARES Act creates a new emergency retirement plan distribution, changes loans and required minimum distributions.
A new emergency distribution called the Coronavirus Related Distribution, (CRD):
- a CRD in any amount up to $100,000 can be withdrawn from an employer sponsored retirement plan such as a 401(k), 403(b), or IRA.
- IRS 10% early withdrawal penalty is waived.
- individual taking the CRD can spread the reported income over three years for tax purposes.
- CRD can be repaid within three years to avoid taxation.
- participants self-certify that they either have contracted the COVID-19 virus, that a spouse or dependent has, or that they have lost a job or been furloughed or suffered a heavy financial burden because of the coronavirus.
401(k) plan loans:
- the maximum loan amount has increases from $50,000 to $100,000.
- loan term can be extended one additional year for new and existing loans.
Required Minimum Distributions are waived for 2020.