The recent impact of COVID-19 has created stress and uncertainty for both Plan Sponsors and Participants around the state of not only their retirement plans, but their everyday lives.
ADMIN Partners understands that it is in times like these that we need to support our clients and partners by helping them navigate the evolving state of the retirement plan industry. ADMIN’s team is committed to providing our clients with continuous education on their plans. This includes the recent impact of the Coronavirus, Aid, Relief and Economic Security (CARES) Act which was signed into law on Friday, March 27th.
The Act provides an additional level of flexibility for retirement plans and grants a number of retirement plan relief measures for Plan Sponsors and plan participants. Here’s a look at some of the provisions impacting retirement plans:
CORONAVIRUS RELATED DISTRIBUTIONS
A provision within The CARES Act waives the 10% early withdrawal penalty tax on distributions up to $100,000 from a retirement plan (or IRA) for plan participants who are impacted by the Coronavirus. These disbursements can be requested by a participant on or after January 1, 2020 and before December 31, 2020. Coronavirus-related distributions are not eligible to be rolled over and are not subject to 20% mandatory withholding. This provision also allows participants to pay tax on the income from the distribution pro-rata over a three-year period from the date of the distribution.
PLAN LOANS
The CARES Act doubles the current retirement plan loan limits to the lesser of $100,000 or 100% of a participant’s vested account balance in the plan. This feature is available for the next six months beginning on the date of enactment of the CARES Act. Plan Sponsors can also use the plan loan provision to modify specific loan policies such as the allowable number of outstanding loans and loan default rules. Retirement plans that currently do not allow loans may also use The CARES Act relief option to amend their plan to now permit loans.
PLAN LOAN REPAYMENTS
Plan participants who have an outstanding loan with a repayment due from the date of enactment of the CARES Act through Dec. 31, 2020, can delay loan repayment(s) for up to one year.
TEMPORARY WAIVER FOR RMD RULES
The CARES Act waives RMDs for calendar year 2020 for defined contribution plans, including 401(k), 403(b), 457(b) and IRA plans. This allows participants to keep funds in their retirement plans.
Please note that these plan updates are optional provisions that a Plan Sponsor can elect to have should they wish to extend the relief to their participants.
Too learn more about the CARES Act and how it impacts your retirement plan, place contact our team of experts at 877-484-4400 or by email at [email protected].