CARES Act – Impact on IRAs and Retirement PlansBy Anne Zavaglia
Posted on April 2nd, 2020
On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). This stimulus package is designed to provide support for emergency assistance and health care response for individuals, families, and businesses affected by the 2020 coronavirus pandemic. 
The CARES Act will have a direct impact on IRA account owners and participants in workplace retirement plans. Individuals that can take advantage of relief provided by the Act include:
- An individual that has been diagnosed with Coronavirus. The test must be approved by the CDC;
- An individual that has a spouse or dependent that had been diagnosed with Coronavirus; or
- An individual who experiences adverse financial consequences as a result of being quarantined, being furloughed, 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, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury. 
Coronavirus Related Distributions
Up to $100,000 can be taken early from qualified retirement plans, including IRAs, Defined Contribution and Defined Benefit Plans. The 10% penalty for taking an early distribution will be waived. The waiver applies only to distributions taken between January 1, 2020 and December 31, 2020. Additionally, there is not a mandatory tax withholding.
The income inclusion for a coronavirus distribution is ratably spread over a 3-year taxable period that begins with the taxable year of distribution (unless the participant elects otherwise). 
If the coronavirus distribution is repaid, the taxpayer will be treated as having received an eligible rollover distribution, and the repayment will be treated as an eligible rollover. The original coronavirus related distribution will be treated as being transferred to an eligible retirement plan in a direct rollover within 60 days of the distribution. 
Increase in Limit on Loans
The loan limits from a qualified employer plan is increased from $50k to $100k. The limit on a participants vested balance increases from 50% to 100%. The effective date for the increased limits is 180 days after the enactment of the CARES Act.
Participants with an outstanding loan may delay their loan repayment for up to 1 year.
The provisions in the CARES Act may be adopted by plan sponsors immediately. Plans utilizing the provisions have until the last day of the plan year in 2022 to amend the plan to include the provisions.
Required minimum distributions from IRAs, including inherited IRAs, and Defined Contribution Plans are waived for the 2020 calendar year. This includes individuals whose first RMD was to be taken by April 1 of this year.
For those that have already taken their 2020 RMD, it will be included in gross income. They have up to 60 days to return a distribution to an IRA or deposit it in another qualified retirement account without owing taxes on it. Another option is to consider converting the amount into a Roth IRA.
Clients that have questions on whether suspending their RMD makes
sense for 2020 should reach out to us.
 U.S. Congress, Senate, CARES Act, S.3548, 116th Cong., introduced March 19, 2020, Div. B, Title I, (Source)
 U.S. Congress, Senate, CARES Act, S.3548, 116th Cong., introduced March 19, 2020, Sec.2103 (4), (Source)
 U.S. Congress, Senate, CARES Act, S.3548, 116th Cong., introduced March 19, 2020, Sec.2103 (5), (Source)
 U.S. Congress, Senate, CARES Act, S.3548, 116th Cong., introduced March 19, 2020, Sec.2103 (3)(B), (Source)