We wanted to let you know that Friday the government passed the CARE Act, if you did not hear. This is a $2 trillion stimulus package to deal with the economic disruption that Covid19 has inflicted on our economy. In fact, today, the Federal Reserve announced that U.S. unemployment will soar to 32% or 47 million people unemployed.
There are a number of provisions in the CARE Act that may be important to you and your retirement plans, 401Ks, IRAs and required minimum distributions.
The highlights are:
The law waives the 10% tax penalty on withdrawals up to $100,000 from a retirement plan for an individual who:
- Is diagnosed with COVID-19;
- Whose spouse or dependent is diagnosed with COVID-19;
- Experiences adverse financial consequences as a result of
- Being quarantined, furloughed, laid off, having hours reduced
- Being unable to work due to lack of child care due to COVID-19,
- Closing or reducing hours of a business owned or operated by an individual due to COVID-19.
Individuals will have the option to pay tax on the income from the distribution over a 3-year period, or repay that amount back to the plan – tax-free – over a 3-year period. Repayments are not subject to contribution limits.
Plan Loans. The law increases the amount a participant may borrow from his or her retirement account to the lesser of $100,000 or 100% of the participant’s vested balance. The Act also allows participants with outstanding loans to delay any loan payments due during the balance of 2020, for up to one year. To qualify, a participant must meet the same criteria as outlined under Coronavirus Related Distributions, above.
Required Minimum Distributions. The law includes a temporary suspension of the required minimum distributions (RMDs) for 2020.
As always, please feel free to reach out to us and stay safe.