In addition to providing relief to taxpayers and businesses during the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act (CARES) that President Trump signed into law on March 27 includes temporary changes to retirement plan guidelines, according to a summary prepared by the Center for Retirement Research at Boston College.
Among the areas impacted by CARES are early distributions, loans, required minimum distributions and defined benefit plans.
For example, prior to CARES being passed, individuals who received early distributions from a retirement savings plan before age 59½ generally paid a ten percent penalty, in addition to income taxes; 20 percent of the distribution was withheld for tax purposes and fully taxed within the same year; and the withdrawn amounts could not be re-contributed.
Under the new law, individuals can receive a coronavirus-related distribution without penalty of up to $100,000 for purposes related to the coronavirus until December 30, 2020. In addition, the 20 percent income tax withholding provision does not apply, and the tax payments on these distributions can be spread over three years. Finally, individuals are allowed to recontribute the amount of the distribution to their retirement plan within three years. Read the full summary.