|If your company sponsors a retirement plan, know that the Sweeping stimulus bill recently signed into law includes many retirement plan relief provisions which could impact you or your employees. Highlights of the major retirement related provisions can be found below. |
Coronavirus – Related Distributions
Employers now have the option to amend their qualifying retirement plans to allow for a new type of distribution. If employers decide to allow for a “coronavirus -related distribution” it can give employees access of to up to $100,000 of their retirement funds in the form of a distribution. While the distribution is taxable income to the employee, it is not subject to the 10% penalty which normally applies to early withdrawal of retirement funds. The employee has the option to pay back the distribution and can also elect to pay the taxes related to the distribution over a 3 year period. Employees impacted by the Coronavirus qualify for the distribution. This includes those who are diagnosed with COVID-19 (or whose spouse or dependent is diagnosed), or those who have experienced adverse financial conditions as a result of: quarantine, furlough, being laid off, having hours worked reduced, who are unable to work due to child care closures, business closures and other factors.
Required Minimum Distributions – Waived for 2020
Individuals who normally would have been required to take an RMD for 2020 (those age 72 under current law) are granted a waiver for the 2020 calendar year and do not need to take their distribution from any 401(k), 403(b), 457(b) and IRA accounts. Note, that RMD’s from a defined benefit plan are still required.
Increased Loan Limits
Employers have the option to amend their plan to double the amount that an employee can take as a loan from their retirement account to the lessor of $100,000 or 100% of the participant’s vested account balance in the plan.
Delayed Loan Repayments
Those employees who have an outstanding loan form their plan who have repayments due between now and December 31, 2020 can delay making their payment(s) for up to one year.
Amendment and Deadline Relief
Immediate Implementation & Plan Amendments
Employers are permitted to adopt these rules immediately, even if the plan currently does not allow for distributions or loans, as long as their retirement plan document is amended on or before January 1, 2022.
Single Employer DB Funding
Those employers sponsoring a single employer defined benefit pension plan who have a contribution due during the 2020 calendar year can take advantage of a delayed contribution deadline and make their deposits by January 1, 2021. (Note that interest must accrue on any delayed payments and be deposited to the plan at the time that the contribution is made)
Funding IRA Contributions
Individuals wanting to make 2019 contributions to their IRA account now have until July 15, 2020 to make those deposits.
If you are interested in amending your plan to allow for any of the above mentioned provisions or if you have any questions regarding this information please don’t hesitate to contact our office. Retirement plan associations are continuing to lobby to provide additional relief to employers during these uncertain times and we are actively following those developments to keep you informed.