On Friday, March 27, 2020, new legislation was signed into law that aims to provide relief to Americans and businesses negatively impacted by COVID-19 crisis. This legislation, known as The Coronavirus Aid, Relief and Economic Security (CARES) Act, is a $2 trillion relief package that includes direct monetary payments to Americans as well as various business subsidies to counteract some of the adverse economic conditions resulting from the pandemic.
Additionally, the law provides several new relief provisions pertaining to retirement accounts. Some of these timebound provisions include the following:
• Penalty-free distributions from retirement accounts – The CARES Act waives the early withdrawal penalty for “coronavirus-related distributions” up to $100,000 from qualified (retirement) plans. Prior to the CARES Act, plan participants under age 59½ were subject to a 10 percent excise tax (penalty) if they made withdrawals from their tax-advantaged retirement plan, such as a 401(k) or IRA.
• Increase on loan amount from qualified plans – For a 180-day period following the enactment of the CARES Act, qualified individuals can take out loans from their 401(k) up to $100,000, up from the previous amount of $50,000. Also, outstanding qualified loan repayments may be suspended for 1 year.
• Required Minimum Distributions suspended – The CARES Act suspends required minimum distributions (RMDs) from tax-deferred retirement accounts for one year. Ordinarily, beginning at age 70½ for those born before July 1, 1949 and age 72 for those born after June 30, 1949, retirees are required to withdraw a set percentage of their account balance. The suspension of RMDs shields retirees from being mandated to withdraw from their accounts, which may have already incurred heavy losses.
The above are just a few highlights of the Act. The legislation is very extensive and includes additional relief provisions for small and medium sized businesses, individuals and households, among many others. We hope you find this information useful.
Please contact us at 716-632-6800 or firstname.lastname@example.org to schedule a meeting to discuss the impact of the CARES Act on you and your family.
Thank you for the continued trust and confidence you place in our team.
This letter is not tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors