Benefits offered under the CARES Act?
CARES Act makes it easier to withdraw funds saved in certain tax-advantaged retirement accounts like 401(k)s and traditional Individual Retirement Accounts (IRAs).
- Withdraw upto $100,000 on or after January 1, 2020, and before December 31, 2020.
- No 10% early distribution penalty.
- No mandatory 20% withholding applicable.
- Under normal circumstances, the amount withdrawn is added to the individual ordinary income. But the CARES act allows the individual to spread over a three-year period starting 2020 to reduce tax burden.
- An individual can contribute back the amount withdrawn to the plan or IRA within three years.
- The maximum loan amount is increased from $50,000 or 50% of the vested account balance to $100,000 or 100% of the vested account balance. The loan should be taken by December 31, 2020.
Who is eligible?
- Is diagnosed or whose spouse or dependent is diagnosed with the virus SARSCoV-2 or coronavirus disease (COVID-19) by a test approved by the Centers for Disease Control and Prevention
- Experiences adverse financial consequences due to one or more of the following factors:
- Being quarantined
- Laid off
- Having work hours reduced
- Unable to work due to lack of child care due to SARS-CoV-2 or COVID-19
- Closing or reduced hours of a business owned or operated by the individual due to COVID-19
- Other factors as determined by the Treasury Secretary
- Plan administrators may rely on an employee’s certification that the employee meets these requirements.
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Please take of yourself and your family.