The Coronavirus Aid, Relief, and Economic Security Act known as the “CARES Act” passed on March 27, 2020 provides $2 trillion in financial relief to individual taxpayers and loans and other concessions to businesses.
The Act also includes several provisions affecting retirement plans which we will cover in later blog posts.
For now, we’ll focus on two important provisions that can benefit participants in 401(k)and profit sharing plans:
- The normal 10% early distribution penalty is waived on up to $100,000 in 2020 for Coronavirus-related distributions from employer retirement plans and IRAs. A three-year repayment period is available.
- Loan limits for Coronavirus-affected participants in employer retirement plans are increased to the lesser of $100,000 or 100% of the vested account balance from the lesser of $50,000 or 50% of the vested account balance. The new limits are applicable through September 27, 2020.
These provisions are optional. Calendar year plans do not have to be amended until December 31, 2022 but must be administered in “good faith”.
Here are the details.