The CARES Act, which was signed into law on March 27, 2020, allows a “qualified individual” to take $100,000 in distributions from an IRA, 401k, or other qualified retirement plan during 2020 and reap the following benefits:

  1. You will not have to pay the 10% early distribution penalty if you are under the age of 59 ½.
  2. You will not have to withhold 20% in federal income taxes.
  3. You will not have to pay tax on the distribution if it is repaid within three years, or if you do not repay the distribution, you can elect to spread the income inclusion over three years.

If you choose to take advantage of the above opportunities, you will need to provide a written statement to your retirement plan provider to show that you are a “qualified individual” (see below).

There are also additional opportunities under the CARES Act to help individuals take advantage of using their retirement funds if they need immediate cash.

The SECURE Act, which went into effect January 1, 2020, also provides other retirement fund opportunities for individuals and small businesses.

A “qualified individual” is defined as someone (including spouse or dependent) diagnosed with COVID-19 or has experienced financial hardship as a result of being quarantined, furloughed, laid off, experienced reduced work hours, or been unable to work due to lack of child care.

Please note that if you are considering taking advantage of CARES Act withdrawal opportunities, CRI recommends that you first consult with your financial advisor prior to withdrawing funds. The ability to withdraw funds tax and penalty-free does not necessarily mean that you should take this course of action in light of your overall retirement plan.

CRI’s Family of Companies includes our own third-party administration retirement services company, CRI TPA Services. CRI TPA Services has compiled various COVID-19 resources, including retirement plan considerations and CARES Act provisions specifically related to retirement plans, to assist clients as they navigate the options that are best suited to their present and their future. To check those out, please visit their website at CRITPA.com. For any questions related to the CARES Act provisions for retirement plan funded relief during the COVID-19 pandemic, please contact your CRI advisor or CRI TPA Services administrator.