Retirement Savings Plans,For Individuals,For Plan Sponsors,Custom

Coronavirus Aid, Relief, and Economic Security Act Signed into Law

March 30, 2020

The $2 trillion stimulus bill, known as the Coronavirus Aid, Relief, and Economic Security (CARES) Act, was signed into law on March 27, 2020, and addresses a range of economic and health-related issues resulting from the COVID-19 pandemic. The following are retirement-related provisions and implications of the CARES Act:

    • Required Minimum Distribution (RMD) Waiver
    • Coronavirus-Related Distributions
    • Loan Relief
    • Employer Actions

RMD Waiver

RMDs to be paid during 2020 are waived for all types of defined contribution plans (including 401(a), 401(k), 403(b), and governmental 457(b) plans) and IRAs. This allows participants age 70½ and over to preserve their defined contribution retirement savings for this period. However, no RMD waiver is available for defined benefit plans.

Coronavirus-Related Distribution

The bill creates a new in-service distribution type from a plan or IRA called a “coronavirus-related distribution” (CRD). The provisions are similar (but not identical) to relief provided in prior years for natural disasters. To be eligible for CRD treatment, the distribution must be made to an individual who is diagnosed with the disease, has a spouse or dependent who is diagnosed, or has experienced adverse financial consequences as a result of the disease. Employees may self-certify eligibility.

Delayed Federal Income Tax and Penalty Waiver. Unless the individual elects otherwise, a CRD is included in gross income in equal amounts over three years. In addition, if the individual would owe the 10% early withdrawal penalty, that penalty is waived for CRDs.

In-service Distribution. A plan may allow a CRD notwithstanding the restrictions that apply to in-service distributions. Thus, for example, a governmental 457(b) plan could offer a CRD to an employee who is not otherwise eligible for in-service distributions.

Eligible Distributions. The distribution must be made on or after Jan. 1, 2020, and before Dec. 31, 2020. The maximum amount for an individual is $100,000 from all plans and IRAs.

Withholding. The mandatory 20% withholding, and requirement to provide a 402(f) notice, which normally apply to eligible rollover distributions, is waived for a CRD.

Repayment. To enable participants to restore their retirement savings, the law allows the distribution to be repaid during the three-year period beginning on the day after the date the distribution is made, back into a plan or IRA. In that case, the repayment is treated similar to a rollover.

Loan Relief

Increase in Maximum Loan. The maximum loan amount would be increased from $50,000 or 50% of the vested account balance up to $100,000 or 100% of the vested account balance. This applies to plan loans taken out during the 180-day period beginning March 27, 2020.

Eligibility. To be eligible for the loan relief described in this section, a participant must meet the same eligibility criteria noted above for CRDs.

Delay in Repayment. For any repayment on a loan due between March 27, 2020, and Dec. 31, 2020, the due date for such payment is delayed for one year.

Employer Actions

The in-service CRD and loan provisions are optional for plans. ICMA-RC is diligently working to develop a streamlined process to assist plan sponsors who wish to implement the optional provisions. The RMD waiver is automatically available to all individuals who must take an RMD in 2020.


Plan sponsors may reach out to their ICMA-RC representatives with questions. We will proactively provide updates and clarifications as quickly as possible.

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