Retirement Plan Withdrawls

The CARES Act was signed into law by President Trump on Friday, March 27, 2020. The Act allows plan participants to withdraw up to $100,000 from their retirement plan or IRA without incurring the usual 10% penalty. Please note that this withdrawal is still subject to ordinary income tax, but this tax can be spread out over three tax years. This withdrawal option is available to any participant (or for the participant’s spouse or dependent) who has been diagnosed with COVID-19, or someone who experiences adverse financial consequences of being quarantined, furloughed, laid off, work hours reduced, or unable to work due to a lack of childcare, or the closing or reducing of hours of a business owned or operated by the individual due to COVID-19. This withdrawal amount can also be paid back, tax-free, into the plan or IRA over the next three years.

The CARES Act doubles the maximum participant loan amount from the lesser of $100,000 (up from $50,000) or 100% of the participant’s vested account balance.

The Act waives the required minimum distributions for defined contribution plans such as 401(k) and 403(b) plans, (but not defined benefit or cash balance plans) and IRAs for 2020 and for any 2019 RMDs that have not yet been made.

Any ERISA-required minimum contributions to a single-employer defined benefit or cash balance plans due during 2020, including quarterly contributions, are delayed to January 1, 2021, but those amounts that are delayed will be increased for interest.

Source: IMPORTANT NOTICE TO SPONSORS OF 401k Safe Harbor Nonelective Plans.pdf (289.5 KB)