IMPORTANT: Summary of the CARES Act

Provisions make it easier to withdraw money from retirement accounts.

 

On March 27, 2020, President Trump signed a historic stimulus bill into law that became effective immediately. The Coronavirus Aid, Relief and Economic Security Act provides relief for retirement plan investors affected by COVID-19.

We’re here to support you through these changes and are actively working to meet the new provisions. We will keep you updated as we learn more.

Here is a summary of key CARES Act provisions:

Penalty-free distributions from retirement accounts
Up to $100,000 can be withdrawn from an IRA, a qualified plan, a 403(b) plan or a 457(b) governmental plan as a coronavirus-related distribution in 2020 with the 10% premature distribution penalty waived. This applies to a participant, spouse or dependent who is diagnosed with the virus or experiences adverse virus-related financial consequences including quarantine, furlough, layoff or reduced work hours, lack of childcare, closing or reduced hours of a business owner/operator. Income tax on the taxable portion of the distribution may be spread over a three-year period.

Repayment of distributions
A coronavirus-related distribution may be repaid within three years of the date of distribution and may be made in increments not to exceed the amount of the distribution that would otherwise be eligible for rollover.

Increased loan limits
Loans are also permitted for COVID-19-affected investors, with the loan limit increased to the lesser of $100,000 or 100% of the nonforfeitable account balance for 180 days after enactment of law. Loan repayments due between the date of enactment through Dec. 31, 2020, may be delayed for one year or, if later, one year after the enactment.  

Required minimum distributions waived for 2020
The law provides a temporary waiver of required minimum distribution requirements and suspends RMDs from defined contribution plans, 403(b) plans and 457(b) governmental plans for 2020. This applies to any distribution required to be made in calendar year 2020 because of a required beginning date in 2020 or because the distribution was not made before Jan. 1, 2020. Beneficiaries receiving distributions over a 5-year or 10-year period can waive the distribution for 2020.

Single employer defined benefit plan minimum funding relief
Single employer defined benefit plans have until Jan. 1, 2021, to meet the minimum funding requirements for contributions due during 2020.

For more information about these changes, please see this summary from NAPA.

 

 

 

IMPORTANT DISCLOSURES

 

Securities and investment advice offered through Investment Planners, Inc. (Member FINRA/SIPC) and IPI Wealth Management, Inc., 226 W. Eldorado Street, Decatur, IL 62522. 217-425-6340.

 

Information derived for sources believed to be reliable; not responsible for information contained in the article.

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