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CARES Act And Retirement Plan Provisions

Updated : August 4th, 2020

On March 27, the U.S. Congress announced the Coronavirus Aid, Relief, And Security (CARES) Act. This act includes wide-ranging implications, including changes to unemployment insurance benefits, support to businesses, and self-employed. The CARES Act also consists of a retirement plan and Individual Retirement Account (IRA) provisions. In this article, we will walk you through the retirement plan provisions under the CARES Act. 

The Coronavirus-Related Distributions

The CARES Act allows plan sponsors (company or employer) to offer a new type of distribution known as the Coronavirus-Related Distribution (CRD). This distribution can be made from qualifying retirement plans that start on January 1, 2020, and end on December 30, 2020. 

Eligibility For Coronavirus-Related Distributions

To qualify for the coronavirus-related distribution, you must be a “coronavirus-affected individual.” That is,

  1. You are diagnosed with the Coronavirus by a Centers for Disease Control(CDC) approved test
  2. Your dependent or spouse is diagnosed with the Coronavirus by a(CDC) approved test
  3. You are unable to take employment due to the Coronavirus child care issue
  4. You experience the adverse financial problem as a result of being quarantined, reduced work hours, laid off, or furloughed due to the Coronavirus
  5. You have experienced other factors as listed by the Secretary of the Treasury
  6. You have closed your business or reduced work hours

The plan administrator may rely on your certification to determine if you satisfy the criteria to be a coronavirus-affected individual.

Required Minimum Distributions

For 2020, Required Minimum Distributions (RMDs) needed for defined contribution retirement plans need not be made. This applies to certain retirement plans and IRA accounts, including:

  • Defined contribution 401(a) qualified plans including 401(k) and profit-sharing plans
  • Government defined contribution 457(b)
  • Defined contribution 403(a) and 403(b) plans

The suspension of the RMD applies to those who have attained the age of 70 1/2 before January 1, 2020. If you have turned 70 1/2 in 2019 and were waiting to take your 2019 distribution, you need not take your 2019 or 2020 RMD. If you have already taken your 2019 or 2020 RMD but is still within 60 days from the RMD date, then you can roll back your distribution to a qualified plan or IRA to avoid any penalty. 

Can You Take Loans From Your Qualified Retirement Plan?

The CARES Act allows you to take loans from your employer-sponsored retirement plans to meet your financial needs during a crisis. Earlier, the loan limit was $50,000, but the Cares Act has temporarily increased the loan limit to $100,000. 

The CARES Act has also shelved the rule that limits the individual to borrow their fully vested balance up to 5-%. It now allows you to borrow up to 100 % of your vested amount. For instance, if you have $20,000 in your 401(k), you can borrow the entire amount. 

Should You Pay Taxes On Withdrawing Money From Your Retirement Plan?

Coronavirus-Related Distributions are not subject to federal income taxation. However, the amount of the CRD is included in gross income for federal tax over the 3-taxable-year beginning with 2020. You can choose to include the total amount of the CRD in gross income for federal tax for 2020 than spreading it over 3 years.

You can pay the money to an eligible retirement plan during the 3-year period that starts on the day after the distribution date. Repayments within the 3-year will result in the CRD not being subject to federal income taxes. But if the federal income tax has been paid already, then the authorities may permit you to receive a refund of that amount.

 

 

 

 

 

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  1. So I have been getting ue for 6 months and on Oct 21 I had a fact finding issue found and cleared after taking a month, I got put on hold I got nothing no benefits nothing because I am on hold until cleared up and it was another month later in my favor, I’ve been without payment since Oct 21 since then I have been on HOLD, I am beyond pissed, I call every Fri I see the letter I received saying its in my favor that says I am Monetary Eligible-yet I still have 6 payments on hold. I call DEO and I talk, I beg and I get told “we are working on it”, the letter is in my favor I am poor not rich I am poor Why how do you people get away with this

  2. Hello

    I’m 59 years old and was laid off in March 2020 due to Covid.
    In June 2020 I was advised my job was eliminated and there is no chance of me
    Being brought back. I’m collecting UI since March.

    Pondering the thought of taking my early retirement pension as I can’t survive on
    UI any longer. My pension is of course reduced due to my age. Full pension is age 62.

    If I apply for early reduced pension in this situation, does my UI benefit get decreased? I’m in New York.
    I’m still looking for full time work. No luck.

    Thank you so much
    Lorraine

  3. i was just layed off from my job, i did collect benefits in pa. my job is seasonal igot unemployment payments in jan. to april i had 26 weeks of unemployment , but only used about 13 weeks, and was called back to work. i received 2 weeks of 600 dollars of stimlus money. my question is now that i reopened my 2020 claim . i,m i still elegibe for any more stimlus payments along with my regular unemployment payments.

  4. I am 65 yrs old in California and being layed off in Dec 2020. If I apply for unemployment benefits and collect a company pension, will the pension reduce the unemployment benefits ? If you answer call unemployment what is the department or do you have a phone number for a help line. I have called and get automated questions that do not apply to my situation.
    Cannot get to a live person.

  5. Several years ago I was part of a reduction in force and was early-retired for pension purposes. I count on this small pension ($2K/mo) to supplement my employment which has been inconsistent this past two years. I am filing for UI in IL and I qualify for it, but they are saying my pension reduces my UI benefit to zero. Is that right?

    1. Mike,

      That is partially right. The pension will have an impact on UI benefits. Please check for relevant info on the Unemployment Office’s website.

  6. I have $219.00 left on my UE and still no work due to covid-19 will i be able to get a extension on my UE and will it cover the last two weeks. I request payment tomorrow.

      1. My benefits have expired, still.unemployed due to over 65, wdiebrtes, high blood pressure and have one kidney, Can I get PUA , Cares Act for any assistance

  7. im working at a place i have been layed off from a lot in my career.i got 30 yrs in there so i can retire now but need another job to make it hoping to stay working and get more hours.If i take a new job and get layed off there I will BE DRAWING 1400 A MONTH FROM THE JOB I WORKED 30 YRS would i be able to draw unemployment if the new job lays me off and would it be reduced because of my retirement money of 1400 month.

  8. My bf was laid off in April he got the the 600 to start with now he is only getting the unemployment and no extra when we hear ppl getting 3 checks totaling 40k that might be lies but still that is bullshit.

  9. I Sharon Bland or Sharon Scott or Sharon Ann Mccraw
    Use my phone to claim two of my boyfriends and my own benefits. Is that ok ?

  10. I’m getting pua on employment and it was supposed to be backdated to May 27th when I wasn’t ableable to start my new job and somehow it’s August 24th they said it would be backdated been sending messages and pua people keep saying they have emailed you guys too but nobody gets back to me who do I need to contact about this thank you

  11. I check my checking account balance every week but I cannot tell if I am getting my 300.00 extra unemployment. Also. How can I tell if I got my back time unemployment .

    1. Thelma,

      I did not understand what you meant. Please reach out to the Unemployment Office for precise answers to all your questions.

  12. I have exhausted my UI and all extensions. Not eligible for Fed Ed. Does EDD open a PUA claim for me. Or do I have to aoole for it. Its been past 30 days since receiving my Fed Ed denial letter.

  13. i have been unemployed for the whole year almost and since i have been trying to distance myself to better my all around health, it took me this long to file for benefits, i was hoping to get back pay all the way to the beginning.

    1. Zach,

      To qualify, the claimant is required to have sufficient earnings/employment during the “Base Period”. Please use the “Benefits Calculator” available on this website for more.

  14. Thank you o much for investigating this. When I received an overpayment statement and my benefits where stopped I felt my heart drop to my stomach. Already being evicted by a slumlord and now no income, i had to start working when i feel very at risk for getting the virus because of pre-existing conditions and the reason for filing in the first place. i am a cosmetologist and considered non-essential. I feel utterley hopeless and helpless in this situation.

  15. I cannot contact anyone in the unemployment offices because the phone hangs up on me in all cases after listening over and over the recorded message. I have called three numbers .

    I have received pandemic unemployment since March 31st. There was a pending adjudication but I never received any questions, letters nor emails about it and I was approved and paid. Now…this is what the website says:
    7 of 7 entries
    Issue Identification Number Employer Name Issue Type Status Date Mailed Level
    0002 7693 59-01
    PUA Pending 11/16/2020 Adjudication
    0002 4773 71-01
    Program Integrity Mailed 11/6/2020 Adjudicati
    Claimant Inbox
    Select the Search button to display your action items. To narrow your search, input issue date range below and select the Search button.
    Issue Date: From: To: 11/6/2020 to 11/16/2020
    Inbox
    • Below are the items that require your attention and that you need to take action on for your claim.
    • Select the Document ID
    I need this money to survive as others do while I am trying to re-establish any contract freelance work I am capable of doing….I report my small jobs as I get them but they do not come close to equaling my unemployment as of yet. Please tell me where I can go to find out what is needed here.

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