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To wear a mask or not?  Proper Social Distancing etiquette?  Confusing right?  

You are not alone, there has been a lot of confusion out there lately.  The confusion has been especially true in education as almost overnight most of my friends and family have become educators.

In an attempt to calm our fears and provide economic relief, on March 27, 2020 the Federal Government signed into law: The ‘Coronavirus Aid, Relief, and Economic Security Act’ better known as the CARES Act.  The four segments of the CARES Act that pertain specifically to Qualified Plan Sponsors and Participants are:

  1. Retirement Distributions and Loans,
  2. Waiver of RMDs,
  3. Expansion of DOL’s Authority on Deadline Postponements, and
  4. Single Employer Funding Rules.

The 800+ page Act is quite lengthy, and some of the most important retirement-related provisions might seem to add even more confusion to our daily lives.

So, in the spirit of keeping it simple, here is an alternative acronym to help highlight those segments.

C – Coronavirus-related Distributions

  • Optional Distributions between January 1, 2020 – December 31, 2020
  • Qualifications must be met. Either:
    • You, your spouse, or dependent are diagnosed with COVID-19, or
    • You experience adverse financial consequences as a result of the COVID-19 pandemic
  • $100,000 maximum withdrawal per individual (All Plans Aggregated)
  • Not subject to 10% early distribution penalty
  • Does not have to meet other distributable events under plan (59 ½, Severance of Employment, etc.)
  • Income Taxes can be paid over a 3-year period

A – Access to Loans Expanded

  • Loan limits increased to $100,000 or 100% of the vested account balance
  • Only permitted for 180 Days after date of enactment (March 27, 2020)
  • Repayment Delays
    • Applies to loan payments due from March 27, 2020 – December 30, 2020
    • May be delayed for one year
    • Due dates adjusted (can go beyond 5-Year period)
    • Additional Interest continues to accrue
  • This is an optional benefit – be sure to check with your plan administrator whether this provision will be made available to you.

R – Required Minimum Distributions (R M D’s)

  • RMD’s are waived for 2020 Distribution Year
  • Applies to: Defined Contribution Plans (such as a 401(k), 403(a) & (b), 457(b) Governmental Plans and IRA’s
  • Does not apply to Defined Benefit Plans
  • Limited Waivers available for 2019 RMDs

E – Extended Deadlines for Plan Amendments

  • Amendments required by the CARES Act do not need to be adopted until the last day of first plan year beginning on or after January 1, 2022
  • For Calendar Year Plans à December 31, 2022
  • Governmental Plans à Last day of first plan year on or after January 1, 2024

S – Single Employer Defined Benefit Plans

  • Provides relief for employers who sponsor Single-Employer Defined Benefit Pension Plans
  • Minimum required contributions for 2020, including quarterly installment payments are not required to be made until January 1, 2021
  • Keep in mind that this does not change or extend the minimum funding deadline for benefits earned during 2019 under these plans.

It is imperative for Plan Sponsors to work with their Third-Party Administrators (TPA) to help amend their plans as soon as possible. This will ensure that those Participants, for example an Educator enrolled in their district’s 403(b) Plan, that are affected directly or indirectly by this vicious COVID-19 Pandemic have access to the options outlined in The CARES Act. It’s worth noting, though not a part of the CARES Act, the deadline to restate Qualified Plan Documents as required in the SECURE Act has been extended to June 30, 2020.

As a 3rd generation employee of National Life Group, I am reminded daily both professionally and personally of the resilient tenure of this 170+ year old company. We have weathered many turbulent times in our history, including: Epidemics, Pandemics, Recessions, Great Depressions, World Wars, Terrorism. Throughout these times we have continued to Keep Our Promises to our policy holders, giving them Peace of Mind during the good times and the bad. All the while Doing Good in the communities that we serve across America.

Reference : Kiel, John. “What you need to know about the Cares Act” NTSA, 1 April, 2020

National Life Group® is a trade name of National Life Insurance Company, founded in Montpelier, VT in 1848, Life Insurance Company of the Southwest, Addison, TX, chartered in 1955, and their affiliates.  Each company of National Life Group is solely responsible for its own financial condition and contractual obligations.  Life Insurance Company of the Southwest is not an authorized insurer in New York and does not conduct insurance business in New York.

This information is not intended as tax or legal advice.  For advice concerning your own situation, please consult with your appropriate professional advisor.