Pub. 1 2020 Issue 4

www.cbak.com 12 In Touch W ith virtually every part of the U.S. economy facing unexpected financial challenges from the coronavirus (COVID-19) pandemic, Congress has passed the largest relief package in U.S. history. Signed into law on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act is designed to assist the millions of Americans affected by the outbreak. The legislation has multiple provisions that affect retirement and health savings arrangements. Retirement Savings Provisions Most financial experts advise against using assets that have been set aside for retirement. But many individuals may have to do just that in order to supplement their income. The following provisions are intended to help individuals access their IRA and retirement plan assets and to replenish those assets later on. • New coronavirus-related distributions (CRDs). Individuals may withdraw up to $100,000 in aggregate from eligible retirement plans without paying the 10% early distribution penalty tax. o A CRD is defined as a distribution made on or after Jan. 1, 2020, and before Dec. 31, 2020, to a qualified individual, defined as:  An individual (or the spouse or dependent of the individual) who is diagnosed with the COVID-19 disease, also called the SARS-CoV-2 virus, in an approved test; or  An individual who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, being forced to close or reduce hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Treasury Secretary. The CARES Act clarifies that employers may rely on participants’ certification that they meet the CRD requirements. o An eligible retirement plan is defined as a qualified retirement plan (e.g., a 401(k) plan), 403(b) plan, governmental 457(b) plan, or an IRA). o CRDs will meet the retirement plan distribution requirements, as long as all distributions from one employer do not exceed $100,000. o Individuals may repay CRDs over three years beginning with the day following the day a CRD is made. Repayments may be made to an eligible retirement plan or IRA. o CRD repayments made within the three-year period will be treated as having satisfied the general 60-day rollover requirement. o CRDs will be taxed ratably over a three-year period, unless an individual elects otherwise. o Although CRDs may be rolled over, they are not considered “eligible rollover distributions” for certain purposes. Employers are not required to offer a direct rollover option. Employers are also not required to withhold 20% on a CRD or provide a 402(f) notice, which explains the tax and rollover options required by IRC Sec. 402(f). • Waiver of RMDs in — or for — 2020. Financial markets have taken a hit in the wake of the coronavirus outbreak. To help savers retain more in their retirement accounts, the CARES Act waives the required minimum distribution (RMD) in 2020 for plan participants, IRA owners, and beneficiaries. o RMDs normally required to be taken for 2020 are waived. o This waiver also applies to individuals who turned 70½ in 2019 but who did not take their first RMD before Jan. 1, 2020. In the absence of additional relief, the next RMD for those individuals must be taken by Dec. 31, 2021. NEWCORONAVIRUS LAW PROVIDES RETIREMENT PLANANDHEALTHCARE RELIEF BY JEN BASSETT