CARES Act Signed into Law on March 27, 2020

The Coronavirus, Aid, Relief and Economic Security (CARES) Act was signed into law by President Trump on Friday. March 27th. This $2 trillion stimulus package includes a number of provisions that impact retirement plans:
 
Distributions
The bill defines “coronavirus-related distributions” and waives the 10% early distribution penalty for up to $100,000 distribution from tax qualified plans. The distributions may be repaid or contributed as a “trust-to-trust” transfer to another qualified plan, within three years of the distribution. The amount distributed may be included as income for tax purposes ratably over three years as well.
 
The new term, “coronavirus distribution", is any distribution from a tax-qualified plan made on or after January 1, 2020 and prior to December 31, 2020 to an individual who:

- Is diagnosed with coronavirus via test approved by the CDC
- Spouse or dependent is diagnosed
- Or experiences adverse financial consequences as a result of quarantine, furloughed or laid off or reduced work hours due to the coronavirus, unable to work due to child care issues caused by the virus, closing or reduction in hours a business owned or operated by the individual due to the virus or other factors as determined by the Secretary of the Treasury.

The plan administrator can rely on the employee certification.
 
Required Minimum Distributions
For Defined Contribution plans, the RMD rules are generally waived for 2020. This includes initial RMDs attributable to 2019 that was not paid by January 1, 2020. If a 2019 RMD has already been received in 2020, the participant may roll it over and defer paying taxes, including rolling it back into the plan. The IRS is expected to extend the 60-day rollover period.
 
Relaxed Loan Rules
With regards to a plan loan, a participant who qualifies for a coronavirus-related distribution can receive a loan for up to $100,000 or 100% of the participant account balance (double the ordinary limits) within 180 days of enactment of the bill. Further. the due date for repayment of an outstanding loan of any qualified participant that occurs from date of enactment to 12/31/2020 is delayed for one year.
 
Hardship Withdrawals
The safe harbor rules for financial hardship have not changed. However, previous rules were updated to allow for hardships in a federally-declared emergency area. These have been declared in certain states but have not been declared nationwide.
 
Defined Benefit Plans
Any ERISA-required minimum contributions to a defined benefit plan due in 2020 is delayed until January 1, 2021. The amount, plus interest, will be due at that time. The minimum contributions that can be delayed also include any quarterly contributions for 2020.
 
While you can start taking advantage of these provisions immediately, the plan must be amended for the new options. In general, these amendments will be required no later than the last day of first plan year beginning on or after January 1, 2022.
 
If you have any questions regarding the impact of these provisions on your Plan or have other questions related to the Plan, your Tycor Account Manager is available by phone at 610-251-0670 or email. We hope that your family, employees and employer remain safe throughout this period and look forward to assisting you with your retirement needs.