CARES Act: Changes for Retirement Accounts


Davis Brown Law Firm

The Coronavirus Aid, Relief, and Economic Security Act (CARES) made short-term changes to the rules for withdrawals from 401(k), 401(a), 403(b) and 457(b) plans and IRAs for qualifying emergencies and adverse financial consequences related to the current pandemic.

What are the changes?

Required Minimum Distributions

Qualifying retirees are not required to take the required minimum distributions (RMDs) from accounts in 2020. This allows retirees to avoid taking distributions from depleted accounts and potentially realizing losses in 2020. Additionally, the RMD waiver applies to inherited accounts and to the small group of individuals who turned 70 1/2 in 2019 but deferred taking their 2019 RMD until 2020. Typically, it should have been taken by April 1, 2020, but this RMD is also waived.


Qualifying current retirement plan participants may take withdrawals from their retirement plans. CARES rules allow:

  • Withdrawals of up to $100,000 for expenses related to coronavirus issues
  • No 10% early-withdrawal penalty or mandatory 20% tax withholding
  • Income taxes will still be due on withdrawals but may be paid over three years
  • Participants will have three years to replace withdrawn funds in the retirement account


Qualifying current participants make take increased loans. CARES rules allow:

  • Loans of up to 100% of vested account balances up to $100,000 for 180 days after the CARES Act is implemented or September 23, 2020. (This is an increase from the current limit of 50% of the vested account balance up to a maximum of $50,000)
  • Loans will have to be repaid, usually within five years, and may be required to be repaid if the participant leaves his or her job. Interest and fees may be charged on a loan, and other plans and IRS rules and limitations may apply.
  • Existing loan payments that are due before December 31, 2020, may be delayed for one year for qualifying reasons.

2019 Contributions

Separate from the CARES Act, but also in response to the Coronavirus pandemic, the IRS extended the deadline for filing of 2019 tax returns. As a result, this also extends the deadline to contribute to an IRA, Roth IRA, or health savings account until July 15, 2020 (the new federal income tax filing deadline).

Who qualifies for a Coronavirus related distribution?

People who may take emergency withdrawals include those who:

  • Are diagnosed with COVID-19 with a test approved by the CDC
  • Have a spouse or dependent positively diagnosed
  • Are quarantined, furloughed, laid off, had their work hours reduced, or have been unavailable to work due to a lack of childcare related to the coronavirus pandemic
  • Have had a closing or hours reduction in an employee-owned or operated business
  • Suffered adverse financial consequences and other factors that the Secretary of the Treasury will determine

What is required to obtain qualifying loans or withdrawals?

Employees must self-certify to the plan sponsor that they qualify for a distribution or loan under the CARES Act.

Plans must permit the loans and withdrawals. Plans that do permit the loans will be required to retroactively amend their plan by the end of the 2022 plan year for private plans and by the end of the 2024 plan year for government plans.

There may be additional measures by the Department of Labor and Congress in the future that affect deadlines and other plan provisions.

Should you take a loan or withdrawal if you qualify?

Individuals and their financial advisors should consider carefully the consequences of withdrawals at this time, and the impact on an employee’s ability to save for retirement in the future.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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