COVID-19 Emergency Spending Bill Retirement Benefits Provisions

Photo of "COVID-19" spelled in scrabble tiles with illustrated viruses floating above

By Claudia Allen

The emergency spending bill signed into law on March 27 contains several provisions related to retirement benefits:

1.        The 10% premature distribution penalty (pre-59 ½ withdrawals) is be  being waived for withdrawals of up to $100,000 from qualified plans for COVID-19 related hardships, generally (1) those diagnosed with COVID-19, (2) those whose spouse is diagnosed, (3) those furloughed or have had their hours reduced due to COVID-19  or (4) those who have had to stop working or reduce their working hours because of child care. This hardship would be self-certified and available until December 31, 2020.  The withdrawal may be paid back into the Plan within 3 years or if not repaid, it is taxed as ordinary income over 3 taxable years.

2.       Plan loans which normally are limited to the lesser of  $50,000 or 50% of the participant’s account balance may be increased to $100,000 or 100% of the account balance.  Repayment would not be required to begin until one year after the loan is taken.

3.       Required Minimum Distributions (RMDs) due to be made by the end of 2020 (based on account balances as of December 31, 2019) from Defined Contribution plans (like 401(k) plans and profit sharing plans) will not be required.

4.       Required funding of defined benefit plan and money purchase pension plan contributions can be delayed until December 31, 2020. This does not permit delay in depositing payroll deductions of salary deferrals.