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There are three areas that affect qualified plans within the CARE Act:

Required Minimum Distributions (RMDs)

RMDs are waived for 2020.  Any of your participants who would normally have to take one will not have to take one this year.

The two optional provisions for a plan are for eligible individuals on or after January 1, 2020, and before December 31, 2020.

An eligible person is someone:

• who is diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention;
• whose spouse or dependent (as defined in Code section 152) is diagnosed with such virus or disease;
• who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Department of the Treasury.

Coronavirus-Related Distributions (CRDs)

If they opt to allow this in their plan, a participant may take up to $100,000 or 100% of their vested balance.  The 10% early withdrawal will not apply, and the 20% mandatory withholding will not apply.

Loan Relief

Eligible individuals with existing loans who meet the Eligibility Criteria and have outstanding loans (whether entered into before or after enactment) are entitled to have any repayment on a loan due between enactment and December 31, 2020, delayed for one year.  Any subsequent repayments must be adjusted to reflect the delay and interest accrued during the delay.

Loan Initiation:  Individuals who meet the eligibility criteria can take out loans during a 180-day period after enactment in amounts up to the greater of $100,000 and 100% of vested account balance (increased from the otherwise applicable limit of $50,000 or 50% of the vested account balance).

Loan Repayments:  For any repayment on a loan due between enactment and December 31, 2020, the due date for repayments by eligible individuals may be delayed for one year.  Any subsequent repayments must be adjusted to reflect the delay and interest accrued during the delay.

Sponsors must affirmatively elect for these enhanced loan benefits to be made available to their participants.

Contact us for more information or additional guidance on navigating the CARES Act.