The new stimulus bill that was signed on Friday, March 27, 2020, known as the CARES Act is a massive and far ranging $2+ TRILLION bill, so it is probably best for us to break it down by sections or likely impacted group. This Act may be cited as the “Coronavirus Aid, Relief, and Economic Security Act.” This post will cover relevant retirement plan changes.
The bill waives the 10% penalty on early withdrawals up to $100,000 from qualified retirement plans for coronavirus-related distributions. For purposes of the penalty waiver, a coronavirus-related distribution is one made during 2020 calendar year, to an individual (or the spouse of an individual) diagnosed with COVID-19 with a CDC-approved test, or to an individual who experiences adverse financial consequences as a result of quarantine, business closure, layoff, or reduced hours due to the virus. Any income attributable to an early withdrawal is subject to tax over a three-year period, and taxpayers may re-contribute the withdrawn amounts to a qualified retirement plan without regard to annual caps on contributions if made within three years.
The bill also waives all required minimum distributions for 2020, regardless of whether the taxpayer has been impacted by the pandemic.
Other Related CARES Act Blog Posts: