Stimulus package helps provide economic relief

The Coronavirus, Aid, Relief, and Economic Security Act (CARES Act) recently signed into law is designed to help provide economic relief for individuals, families and businesses.

For retirement plans, the CARES Act does the following:

  • creates a new coronavirus-related distribution option of up to $100,000, which is not subject to the IRS early withdrawal penalty and has special tax payment options
  • increases plan loan limits from qualified retirement plans to the lesser of $100,000 or 100 percent of the vested account balance
  • grants a temporary waiver of Required Minimum Distributions (RMDs) to help provide relief for retirees

These changes, however, are not mandatory so your employer will need to decide if they will implement the changes for your retirement plan.

The CARES Act impact on retirement plans

Here are more details on what The CARES Act provides for retirement plan participants. Specifics will be determined by your employer’s plan.

Plan distributions

The CARES Act creates a new distribution option of up to $100,000 from retirement plans to affected individuals, without being subject to the IRS 10 percent early distribution tax that would otherwise apply.

The Act allows the recipient to pay taxes on the distribution over a three-year period. The individual is also given the option to repay the distribution amount in one or more payments within three years following the date of distribution.

This relief applies for distributions beginning January 1, 2020 through December 30, 2020, and is available to an individual:

  • Who is diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (collectively COVID-19), through a test approved by the Centers for Disease Control and Prevention (including a test authorized under the Federal Food, Drug, and Cosmetic Act)
  • Whose spouse or dependent (defined as children or relatives living in the home or who the individual provides more than 50% of their annual financial support)1 is diagnosed with such virus or disease by such tests, or
  • Who experiences adverse financial consequences due to COVID-19 as a result of the individual, their spouse or a member of their household (defined as an individual sharing a personal residence):
    • being quarantined, furloughed, laid off or having work hours reduced
    • being unable to work due to lack of childcare
    • closing or reducing hours of a business owned or operated personally or by a spouse or member of the household
    • having a reduction in pay (or self-employment income)
    • having a job offer rescinded or start date for a job delayed
  • Or other factors as determined by the Secretary of the Treasury.

Plan loans

The CARES Act also increases the amount available for a retirement plan loan and provides loan repayment relief to individual's identified as eligible for a distribution under the Act.

For the period March 27, 2020 through September 22, 2020 the loan limit may be increased to the lesser of $100,000 or 100 percent of your vested account balance.

An individual with an outstanding retirement plan loan on or after March 27, 2020, may be provided the opportunity to suspend loan repayments due through December 31, 2020 and may be allowed to extend a loan's maximum repayment period by up to one year.

Temporary waiver of Required Minimum Distributions

To provide relief for retirees, the CARES Act waives the required minimum distributions for the 2020 calendar year for individuals or certain beneficiaries. The waiver applies for any required minimum distribution for the 2020 calendar year, including an initial distribution for an individual attaining age 72 in the 2020 calendar year, or for an initial required distribution for 2019 not made before January 1, 2020 for a required beginning date occurring in 2019. The waiver also applies to beneficiaries that would otherwise be required to receive the entire death benefit within five years following the participant’s year of death, allowing the beneficiary an additional year to receive the full distribution.

We are here for you

Securian Financial is closely monitoring all legal and regulatory action that could impact retirement plan provisions and will provide updates as more information becomes available.

Plan options in response to COVID-19

CARES Act distributions and loans

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Financial professionals do not provide specific tax/legal advice and this information should not be considered as such. You should always consult your tax/legal advisor regarding your own specific tax/legal situation.

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding any funds or stocks in particular, nor should it be construed as a recommendation to purchase or sell a security. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested.

This is a general communication for informational and educational purposes. The materials and the information are not designed, or intended, to be applicable to any person's individual circumstances. It should not be considered investment advice, nor does it constitute a recommendation that anyone engage in (or refrain from) a particular course of action. If you are seeking investment advice or recommendations, please contact your financial professional

Securian Financial’s qualified retirement plan products are offered through a group variable annuity contract issued by Minnesota Life Insurance Company. Securian Financial is the marketing name for Securian Financial Group, Inc. Minnesota Life Insurance Company is an affiliate of Securian Financial Group.

DOFU 4-2020