Coronavirus Aid, Relief and Economic Security Act (CARES Act)
The CARES Act which was enacted on March 27, 2020 is a new law that includes certain relief provisions applicable to retirement plan administration.
Distributions
The Plan allows for coronavirus-related distributions, up to a total of $100,000 from April 20 through December 30, 2020 to Eligible Participants who meets one of the following criteria:
· Is diagnosed with a coronavirus (COVID-19 or SARS-CoV-2) illness by a test approved by the CDC;
· Has a spouse or dependent diagnosed with such coronavirus illness by a test approved by the CDC; or
· Experiences “adverse financial consequences” as a result of being quarantined, furloughed, laid off, having a reduction in work hours, a business closure, the lack of childcare, or other factors determined by the IRS due to the coronavirus emergency.
Increased Loan Limits
The Plan allows Eligible Participants to take loans up to the lesser of $100,000 or 100% of the participant’s vested account balance from April 20 through September 22, 2020 (180 days from date of enactment of the Act).
The availability of the coronavirus-related loans will supersede the Plan’s otherwise applicable limitations on number of available loans and/or frequency with which a loan may be taken by allowing for one additional loan, available without regard to the date any prior loan was taken.
The Participant’s will be required to self-certify as to their qualification for this distribution.
Loan Suspension
The Act allows Eligible Participants with loan repayments due during the period of March 27, 2020 through December 31, 2020, to suspend their repayments for one year. At the end of the suspension period, the participant’s loan repayments will be adjusted to reflect the interest accrued and the participant’s loan term will be extended to reflect the suspension period, which may exceed the normal 5 year maximum term for general purpose loans or the plan limit on principal residence loans.
Required Contributions
The Act also relieves participants and beneficiaries from receiving a required minimum distribution (RMD) for 2020, and for 2019 if the participant turned age 70½ in 2019 and did not receive their first RMD for 2019 on or before January 1, 2020.
If you have any questions about the CARES Act, contact Transamerica at (866) 498-4557