How the CARES Act Increases Access to Your Retirement Savings

Retirement Programs and the CARES act


In response to the coronavirus pandemic, the Coronavirus Aid, Relief, and Economic Security Act, (CARES Act) was signed by the President on March 27, 2020. In addition to a variety of stimulus aid offered to businesses impacted by the pandemic, the Act also includes a provision that will allow individuals impacted by the COVID-19 disease to increase access to their retirement savings. These provisions are as follows:

Early withdrawals

  • Waiver of 10% tax on early retirement plan withdrawals related to coronavirus
    • Provides for distributions up to $100,000 from tax qualified retirement plans
    • Distributions are taxable but individuals can pro rate the tax over three years
  • A coronavirus related distribution is a distribution taken in the 2020 calendar year by an individual:
    • Diagnosed with coronavirus
    • Spouse or dependent diagnosed with coronavirus
    • Experiencing adverse financial consequences
      • Furloughed or laid off
      • Work hours reduced
      • Inability to work due to a need to provide child-care
      • Closing or reducing hours of a business
      • Other factors that may be determined by the Secretary of Treasury
  • Employers may rely on participant self-certification of the hardship
  • Individuals who take coronavirus related distributions can repay the amount to an eligible retirement plan within three years of the distribution. Should the individual choose to repay the full amount in 2022, they may file amended federal income tax returns for 2020 and 2021 to claim a refund of the tax attributable to the distribution. Such repayments are treated as rollovers and will not impact other annual contribution limits. California conforms; other states may be different.  Call your RINA professional to discuss your specific circumstances. 


  • Changes would apply to qualified individuals
  • Loan limit increased from $50,000 or 50% of the account balance to $100,000 and up to 100% of the account balance
  • Availability of this loan option is the first 180 days after March 27, 2020.
  • Existing loans with a repayment due date between March 27, 2020 and Dec. 31, 2020 will receive a one-year extension to the due date

Required Minimum Distributions

  • Waiver of all Required Minimum Distributions (RMDs) from tax-qualified plans for 2020

Plan Sponsor Considerations

  • The provisions appear to be voluntary and will require a plan amendment. However, plan sponsors can begin offering these options to employees as soon as administratively feasible and will have until the last day of the plan year that begins in 2022 to amend their plan.
  • Before adopting these provisions, a plan sponsor should review current withdrawal options available within their plan and consider whether their employees need the expanded access to retirement savings. For example, a recent change in the hardship withdrawal safe harbors allows for access to a hardship withdrawal for FEMA declared disasters. FEMA has already declared disasters for several states which would provide access through hardship withdrawals.
  • The Act appears to apply to the full plan balance, so plan sponsors may want to consider whether or not to limit the funds available for this new type of withdrawal. For example, plan sponsors with very generous employer contributions should think about whether they would limit access to employer contributions. Sponsors should consider the long-term impact these withdrawals may have on their employees’ ability to retire.
  • Plan sponsors seeking to limit the long-term impact on their employees’ retirement savings may consider only offering the expanded loan provisions.
  • Some recordkeepers are offering a negative election to sponsors where they must ‘opt out’ or the provisions will automatically be added to their plan. If a plan sponsor is unsure whether their employees need this increased access or are considering limiting the sources available for withdrawal, they should consider opting out of this negative election. The provisions can be adopted at any time, so opting not to add them now does not take away the option of adding at a later date.

Employee Considerations

  • Withdrawing funds from a retirement account is often viewed as a last resort due to the future impact on an employee’s successful retirement. Employees should carefully consider all options before taking a coronavirus related distribution (including plan loans).
  • Coronavirus related distributions are not subject to the 10% early withdrawal penalty but are still taxed as income. An employee should consider the tax implications of any withdrawal and be aware that they will need to pay taxes on that amount.
  • Employees should review the impact of the recent market downturn on their retirement savings and recognize that they are possibly selling at a low point and will miss out on the benefits of a recovery.
  • If a loan is an option, you will be repaying the amount to yourself over time, which may reduce the impact on your retirement savings long term.

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