The IRS has updated guidance for when retirement plan participants can receive distributions from, or loans against, their plan funds for coronavirus-related issues.
An IRS notice released June 19 expands and clarifies initial qualifications set forth in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Under the new rules, a “qualified individual” who can access funds based on this provision is someone who:
- Is diagnosed with COVID-19, or has a spouse or dependent who is diagnosed with the virus.
- Faces reduced work hours, reduced income, or furloughs because of the virus, or because of virus-related quarantine. This also applies to self-employed individuals or business owners.
- Cannot work because of COVID-related child care closures.
- Has a job offer rescinded because of the virus, or has a start date delayed.
Individuals may take up to $100,000 in distributions from eligible retirement plans between Jan. 1 and Dec. 30 of this year under these provisions. Such withdrawals are “not subject to the 10% additional tax that otherwise generally applies to distributions made before an individual reaches age 59½,” per a press release announcing the IRS notice.
The CARES Act also allows for plans to suspend retirement-plan loan repayments due from March 27 to Dec. 30 of this year, and to raise the limit on loans made from March 27 to Sept. 22 from $50,000 to $100,000.
[RELATED: MOAA's Retirement Resources]
Plan participants may be eligible for other tax benefits related to retirement plans and COVID-19; check the notice for full details.
MOAA’s Financial Education Team compiled this recap of key CARES Act provisions, which includes more details on retirement provisions, as well as stimulus funds and other details. Get more financial resources from MOAA here.