The CARES Act increases available plan distributions and the amount of loans available from plans to participants. The Act also waives required minimum distribution requirements for 2020.

Coronavirus-Related Distributions

Plan sponsors may now offer participants the option to take coronavirus-related distributions (CV distributions) of up to $100,000 from their accounts in qualified retirement plans, 403(b) plans, and governmental 457(b) plans.

• CV distributions will be available to participants who become ill (or whose spouses or dependents become ill) from COVID-19 or who experience adverse financial consequences from being furloughed, laid off, or quarantined; losing childcare; losing work hours; or other impacts identified by the U.S. Department of Treasury. Participants will be able to self-certify their eligibility for a distribution.
• CV distributions are available effective immediately and may be taken up until December 30, 2020.
• CV distributions are not subject to the 10% early withdrawal penalty for distributions to made participants under age 59.5. While the distributions otherwise remain taxable (unless repaid, as discussed below), participants may include the income from the distribution ratably over a 3-year period.
• Participants are permitted to repay CV distributions within 3 years of the distribution. If the distribution is repaid within the 3-year period, it will be treated as a rollover.

Changes to Plan Loan Rules

The Internal Revenue Code was amended to increase the maximum plan loan amount available to participants from $50,000 to $100,000 (or 100% of a participant’s vested account if less than $100,000) for loans taken within the 180-day period following the enactment of the CARES Act. Additionally, effective for both existing loans made prior to the CARES Act and new loans taken prior to December 31, 2020, loan repayment dates are permitted to be delayed for 1 year if a participant with a loan becomes ill (or the participant’s spouse or dependents become ill) from COVID-19 or experiences adverse financial consequences as a result of being furloughed, laid off, or quarantined; losing childcare; losing work hours; or other impacts identified by the U.S. Department of Treasury in connection with COVID-19.

Waiver of Required Minimum Distributions

The CARES Act eliminates required minimum distributions (RMDs) for 2020. Participants who are required to take RMDs from their retirement plans (generally those over age 72) are not required to take RMDs for 2020 or 2019 RMDs that were to be made by April 1, 2020. The RMD waiver applies to all qualified defined contributions plans, 403(b) plans, governmental 457(b) plans, and individual retirement accounts (IRAs). Further, the year 2020 will be disregarded for purposes of determining the 5-year period for the required depletion of inherited retirement plan accounts and IRAs. Finally, distributions of amounts that would have otherwise been subject to RMDs in 2020 may be rolled over.