| wealth management  by Kathy Sablone, JD, AEP®, Director of Wealth Planning

The Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law by President Trump on Friday, March 27th. This $2 trillion stimulus package provides an extensive array of relief, including some provisions that address retirement plans.

The CARES Act makes the following changes to rules for qualified retirement plans for 2020:

Waiver of RMDs for 2020

Required Minimum Distributions are waived for 2020. This includes distributions that would have been required for any participant in pay status or any beneficiary required to take distributions from an inherited IRA. The waiver also applies to any taxpayer whose first RMD was for 2019 and due by April 1, 2020, if that RMD has not already been taken. Plan participants who have already taken their 2020 RMD but are still within 60 days of the distribution may take advantage of the 60-day rollover rule to return the funds to the account without including the distribution in income. 

No 10% Penalty for Coronavirus Related Withdrawals

For taxpayers who are under age 59 ½, the CARES Act waives the 10% penalty on withdrawals from retirement plans and IRAs for withdrawals of up to $100,000 if certain requirements are met. The withdrawals qualify if the taxpayer, their spouse, or a dependent is diagnosed with SARS-CoV-2 or COVID-19, or if they suffer adverse financial consequences due to the pandemic. The taxpayer may repay part or all of this withdrawal over three years. Any portion that is not repaid may be included for tax purposes over three years. 

Increase in Maximum Loan Amount

Under current law, participants may only take a loan from a qualified plan equal to the lesser of 50% of the plan or $50,000. The CARES Act increases these limits to the lesser of the entire balance of the plan or $100,000. Loan repayments that are due in 2020 may be delayed for one year after the original due date. 

If you have any questions, please contact a member of our Estate and Financial Planning Group:

Kathy Sablone – [email protected] or 617-956-9712

Alisa Kim O’Neil – [email protected] or 617-275-0313

Important: This article does not contain any legal or tax advice. You should always consult with your attorney, accountant or other professional advisors before changing or implementing any tax, investment or estate planning strategy.

IRS Circular 230 Disclosure: Pursuant to IRS Regulations, we inform you that any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax related penalties or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.