The Federal CARES Act Offers Flexibility on Issues Relating to 401(k) and IRA Plans

The Federal CARES Act Offers Flexibility on Issues Relating to 401(k) and IRA Plans

In a direct response to the COVID-19 pandemic, on March 27, 2020, the federal government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). Section 2202 of the CARES Act allowed for special distribution options and rollover rules for retirement plans and IRAs, as well as expanded permissible loans from some retirement plans. More specifically, the CARES Act permitted 401(k) and IRA plan participants to (1) take coronavirus-related distributions of up to $100,000, if the plan permits this distribution, without the assessment of the traditional 10% additional tax on early distributions; (2) take out larger loans from employer plans, increasing the maximum permissible loan from $50,000 to $100,000; (3) delay repayment of outstanding retirement plan loans, such that loans taken between March 27, 2020, and December 31, 2020, must be delayed by one year; and (4) waive required member distributions for calendar year 2020. More information on Section 2202 of the CARES Act can be found here.