The President recently signed into law the Coronavirus Aid, Relief, and Economic Security Act or “CARES Act.” The CARES Act is primarily a stimulus package that addresses the current coronavirus crisis, and it includes several provisions relating to employee benefit plans.

Retirement Plans

Penalty-free coronavirus-related distributions — The 10% early withdrawal penalty under Internal Revenue Code (Code) Section 72(t) is waived for “coronavirus-related distributions” of up to $100,000. In addition, the 20% withholding requirement on these distributions does not apply. A coronavirus-related distribution is a distribution made in 2020 from a qualified retirement plan (including a 401(k) plan, 403(b) plan, 457(b) plan, individual retirement account, or individual retirement annuity) to a “qualified individual” (see the definition of a qualified individual below). A plan administrator may rely on an employee’s certification that the distribution is a coronavirus-related distribution. A coronavirus-related distribution is not treated as an eligible rollover distribution and may not be contributed as a rollover contribution to an individual retirement account or another employer retirement plan.

• Qualified individual — An individual (1) who is diagnosed with COVID-19, (2) whose spouse or dependent is diagnosed with COVID-19, or (3) who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to COVID-19, or other factors as determined by the Treasury Secretary.

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