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CARES Act and IRAs

Contribute to your future with a savings account designed for retirement.

The CARES Act and Your IRA

 

To help support individuals who may have been impacted by COVID-19, Congress passed the Coronavirus Aid, Relief and Economic Security Act (CARES Act) on March 25, 2020. Provisions of the CARES Act helps individuals who currently have an eligible retirement plan (IRA) and would like to delay their contributions, make an early withdrawal, or delay their required minimum distribution. Here are a few important details:

  • IRA contributions for tax year 2019 have been extended to July 15
  • Qualifying distributions will be exempt from the 10% early distribution penalty tax
  • Up to $100,000 can be withdrawn by a qualifying individual from an eligible retirement plan
  • Qualified individuals will have the option to take advantage of an extended repayment period (up to 3 years)
  • Individuals, including beneficiaries, will not be required to take their 2020 Required Minimum Distribution (RMD)
 
Special rules for individuals affected by COVID-19

The CARES Act provides provisions for Coronavirus-Related Distribution (CRD) IRA Distribution to the following individuals:

  • Individuals diagnosed with COVID-19 by a CDC-approved test or whose spouse or dependent was so diagnosed, or
  • Individuals who experienced adverse financial consequences as a result of:
    • Being quarantined, furloughed or laid off due to the virus, or
    • Being unable to work because of a lack of child care due to the virus, or
    • The closing or reduction of hours of a business owned by the individual due to the virus, or
    • Other factors determined by the Secretary of the Treasury.
 
Coronavirus-Related Distribution (CRD) IRA Distribution

A Coronavirus-Related Distribution (CRD) is defined as any distribution made on or after January 1, 2020, and before December 31, 2020, to a qualified individual. This allows:

  • Up to $100,000 to be withdrawn by a qualifying individual from an eligible retirement plan and
  • These distributions will be exempt from the 10% early distribution penalty tax
 
CRD IRA Repayment
There will be a three-year repayment period beginning the day after distribution, during which one or more repayments may be made, not to exceed, in aggregate, the amount distributed. Members can recontribute these amounts to any eligible retirement plan or IRA. 
 
Members also have the option to take taxes at the time of the withdrawal or their CRD IRA repayments will be taxed ratably over a three-year period. If you are unsure which option is right for you, please consult with your tax advisor.
 
Required Minimum Distributions - RMD

Individuals, including beneficiaries, will not be required to take their 2020 Required Minimum Distribution (RMD) including individuals who turned 70½ in 2019 but did not take their RMD before January 1, 2020.

  • Individuals can rollover a RMD into an IRA as long as it is within 60 days from distribution date
  • Non-spouse beneficiaries cannot rollover any distributions at this time
  • The 2020 year will not be counted for purposes of a five-year payout period for a beneficiary under this option/requirement. (This provision will not alter a required beginning date for years after 2020).
 
This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors if you have any additional questions regarding the CARES ACT or your CRD IRA.


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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