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COVID-19, The CARES Act, and Your Retirement Plan

COVID-19, The CARES Act, and Your Retirement Plan 

With the passing of the CARES Act there are several items that may directly affect you and your retirement plan.  Below are a few of the main items from the act.   

Qualified Individuals 

  • The CARES Act identifies Qualified Individuals as individuals: 
    • affected by the Coronavirus as a result of the CDC-confirmed diagnosed. 
    • whose spouse or dependent have a positive diagnosis. 
    • experiencing adverse financial consequences due to the coronavirus. 
  • Plan Administrators may rely on a participant’s certification of the above 

Coronavirus Related Distribution CRD 

  • The CARES Act introduces a new in-service distribution option for qualified individuals which may be taken through December 31, 2020.  
  • The 10% early withdrawal penalty is waived for CRDs. 
  • Withdrawals are limited to a maximum of $100,000.  
  • The act allows the participant to pay the distribution back to the plan over a 3-year period if desired. 

Loan Relief for Qualified Individuals 

  • The act increases the maximum loan limit from $50,000 or 50% of the vested account balance to $100,000 or 100% of the vested account balance. 
  • Loan repayments may be suspended, at the request of the participant, for a period of one year, which will be added to the original term when repayments begin, regardless of the original length of the loan’s term. 

Required Minimum Distributions RMD Waiver 

  • RMDs for 2020 are waived for all defined contribution plans.  This includes those RMDs with a beginning period of 2019 but due in 2020. 

Plan Amendments 

  • Plans wishing to offer these benefits will need to be amended to include these provisions.  Please contact your Relationship Manager to initiate the amendment process.   
  • Plans will be permitted to operate in accordance with these changes before amendments are formally adopted.  Amendments must be made on or before the last day of the plan year beginning on or after January 1, 2022 

Plan Contributions 

  • The act does not provide a delay in remitting elective deferrals to the plan.  Failure to remit contributions timely may result in Department of Labor penalties.  Please continue to remit these contributions timely in order to avoid these penalties. 

Company Contributions 

  • During these uncertain times, there may be some flexibility in company contributions.  Winvite you to reach out to your Relationship Manager to the discuss the specific options available to your plan and what effects they may have on the annual compliance testing for your plan. 

Partial Plan Termination 

  • During these trying times, it is a reality that many companies will be forced to furlough, lay off, or reduce hours for some of their workforce.  These actions may require careful participant transaction consideration, such as that necessary in the event of a partial plan termination.  If this is, or may become the case for your workforce, please contact your Relationship Manager as early as possible to ensure proper plan compliance. 

There are several other items in the bill that may also influence your plan depending on your plan design.  For additional information, please contact us to discuss your plan in more detail.  We recognize that these are unprecedented times.  We are all in this together and NBS is here to provide you the high level of service that you expect and deserve.  We are grateful for your business and look forward to helping you navigate these unchartered waters.