The Coronavirus Aid, Relief and Economic Security Act (CARES Act) was signed by President Trump to help provide financial stability and relief for individuals and businesses affected by COVID-19. The bill is very broad and addresses a number of areas and industries, and many of the specific details will still need to be analyzed.
To qualify for COVID-19 relief in the area of retirement accounts, there are “COVID-19 qualifying criteria” that apply with the exception of the 2020 RMD Waiver for Retirement Accounts highlighted below. The criteria to qualify for the retirement provisions of the CARES Act include a diagnosis of COVID-19, have a spouse or dependent who is diagnosed with COVID-19, or experience adverse financial consequences as a result of COVID-19 including quarantines, layoffs, business closures or child care responsibilities.
Following are the highlights of The CARES Act with regard to Retirement Accounts:
2020 Required Minimum Distributions Waived for Retirement Accounts With the exception of defined benefit plans, required minimum distributions (RMDs) are waived for all employer plans and IRAs in 2020, including inherited accounts. This provision also applies to RMDs due in 2020 but attributable to 2019. Distributions must be taken on or after January 1, 2020 and before December 31, 2020 to qualify. As mentioned above, individuals do not need to meet COVID-19 qualifying criteria to waive RMDs for 2020.
2020 Distributions can be “Rolled Back” Additionally, retirement account holders have the option to roll the distributions back into any retirement account eligible to receive a rollover for up to three years. Distributions may be rolled back in one or more transactions, and the rollovers do not count toward the one rollover per 12-month rule. This applies to inherited and successor IRA accounts.
Elimination of Early Withdrawal Penalty This waives the 10% early withdrawal penalty for withdrawals up to $100,000 from qualified retirement accounts, including IRAs and 401(k) plans, for retirement plan participants who qualify for COVID-19 relief. Income tax on the distribution would still be owed but could be paid over a three-year period.
Increase in the Retirement Plan Loan Amount This provision increases the amount that can be taken as a loan from a qualified retirement plan from $50,000 to $100,000 for 2020.
As with any decision involving taxes, consult your tax professional on considerations and impacts to your specific situation. This excerpt is from a highlight of the CARES Act provided by Jeff Moore, Financial Advisor of Edward Jones in Dallas, GA. 770-443-2844.