The Coronavirus Aid Relief and Economic Stability Act (CARES) (Public Law 116-136) was signed into law on March 27, 2020. The University of South Carolina will temporarily relax early distribution and loan provisions to the 403(b) plans until December 31, 2020 for qualifying individuals. These temporary changes will eliminate tax penalties on certain early withdrawals and relax certain restrictions on loans employees can take from their account.
Withdrawal and Loan Provision
Legislation restricts relief to qualified participants with a valid COVID-19 related reason for early access to retirement funds. These include:
- Being diagnosed with COVID-19
- Having a spouse or dependent diagnosed with COVID-19
- Experiencing a layoff, furlough, reduction in hours, or inability to work due to COVID-19 or lack of childcare because of COVID-19
Qualified Individuals are permitted to take coronavirus-related distributions up to $100,000 on or after January 1, 2020 and before December 31, 2020. Under the terms of the CARES Act, such distribution will not be subject to the 10% early distribution tax imposed by the Internal Revenue Service (IRS) for 403(b) plans.
The amount available for a retirement plan loan may be increased to the lesser of $100,000 or 100% of the vested account balance during the 180-day period starting with March 27, 2020 the date of the CARES Act enactment.
Extend Loan Repayment Period
The due date for any loan repayment that is otherwise due on or after March 27, 2020 through December 31, 2020 may be delayed for one year.
Waive Required Minimum Distributions Provision
Section 401(a)(9)(I)(i) provides for a waiver of RMDs for defined contribution plans and IRAs for 2020. This applies to all RMDs due in 2020, including participants with the April 1, 2020 required beginning date who did not take their first RMD prior to January 1, 2020. Minimum distributions are generally required at age 70 ½ or 72 (for those who turned 70 on July 1, 2019, or later).