COVID-19Jones Waldo NewsLegal Alert- Retirement Plan Distributions and Loans in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act)

Retirement Plan Distributions and Loans in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act)

On March 27, 2020, Congress enacted and President Trump signed the CARES Act (Pub.L. No. 116-136). The CARES
Act includes several provisions affecting distributions and loans from qualified retirement plans that are related to
the COVID-19 virus. The following summarizes certain provisions of the CARES Act as is applicable to qualified
retirement plan distributions and loans.

Distributions: Under § 2202(a) of the CARES Act, qualified retirement plans and IRAs may permit (but are not
required to) individuals to receive Coronavirus-related distributions up to $100,000 in the aggregate from all plans
maintained by the company (and any member of a controlled group). The 10% additional tax that applies to
distributions received by an individual that has not attained age 59½ is waived for Coronavirus-related distributions
that are received between January 1, 2020, and December 31, 2020.

Generally, a Coronavirus-related distribution is a distribution from a qualified retirement plan made to an individual
(i) who is diagnosed with virus SARS-CoV-2 or COVID-19 by a test approved by the Centers for Disease Control and
Prevention, (ii) whose spouse or dependent, is diagnosed for such illness by such test, or (iii) who experiences adverse
financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced
due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, or other
factors as determined by the Secretary of the Treasury. The plan administrator may rely on the employee’s
certification that the Coronavirus-related distribution requirements are met.

Unless the participant elects otherwise, the Coronavirus-related distribution is to be included in income ratably over
three taxable years beginning in the taxable year the distribution is received. An individual receiving a Coronavirus
related distribution (other than from an IRA) may repay the amount of the distribution (or any portion thereof) by
making one or more contributions to an IRA or any other eligible retirement plan. Such distributions are treated as
eligible rollover distributions if they are repaid within three years following the date of the distribution.

Plan Loans: Under §2202(b) of the CARES Act, retirement plans may increase the number of plan loans available to
employees who are eligible to receive Coronavirus-related distributions. More specifically, the CARES Act provides
that, during the 180-day period following the date of enactment (March 27, 2020), such employees may receive plan
loans that do not exceed the lesser of $100,000 (increased from $50,000) or 100% (increased from 50%) of the present
value of the employee’s nonforfeitable accrued benefit under the plan. The CARES Act also allows the due date for
the repayment of any outstanding plan loans occurring between March 27, 2020, and December 31, 2020, to be
delayed for one year. Plans adopting this provision must adjust subsequent repayments appropriately to reflect the
delay in repayment and any interest accruing during the delay.

Temporary Waiver of Required Minimum Distributions (RMDs): Section 2203 of the CARES Act temporarily waives
the RMD requirement from § 401(k) and other defined-contribution plans and IRAs for participants who were
required to receive such distributions in 2020. The waiver does not apply to RMDs for calendar years after 2020.
Plan Amendments: The distribution and loan options discussed above are optional. If a company desires to implement
these provisions in its retirement plan, the plan must be amended by the last day of the plan year beginning in 2022
(December 31, 2022, for plan years that match the calendar year).

If would like to discuss whether adopting these provisions is appropriate for your retirement plan, please contact us
to set up an appointment to discuss. These provisions are effective immediately. Consultation in connection with
your plan service provider to ascertain fees associated with administering these provisions, which will include
drafting employee communications and updating the plan’s distribution and loan procedures, is recommended.

For further information or assistance, please feel free to reach out to:

Geoffrey Gunnerson at ggunnerson@joneswaldo.com | (801) 407-6541

Bruce Babcock at bbabcock@joneswaldo.com | (801) 534-7246

© JONES WALDO HOLBROOK & MCDONOUGH, PC 2018 ALL RIGHTS RESERVED.