Retirement Plan Provisions of the CARES Act

AAFCPAs would like to make clients aware of retirement plans provisions included in the Coronavirus Aid, Relief and Economic Stimulus (CARES) Act legislation. These provisions include expanded and penalty-free withdrawal rights, expanded loan rights, extended rights to repay loans and withdrawals, and a deferral of mandatory distributions.

Coronavirus-Related Hardship Distributions

The 10% early distribution penalty from retirement plans and IRAs under Section 72(t) of the Internal Revenue Code will not apply to coronavirus-related distributions up to $100,000 per person from the person’s retirement plan accounts. The amount distributed may be re-contributed to the retirement plan, or to another plan, within three years after the date the distribution is received without regard to any plan limit on contributions. If the individual does not re-contribute the distribution within that time period, taxation on the distribution may be spread over a 3-year period. Federal income tax withholding is not required on a coronavirus-related distribution, and a direct rollover need not be offered.

A coronavirus-related distribution may be taken at any time in calendar year 2020, by an individual:

  1. who is diagnosed with COVID-19 by a CDC-approved test,
  2. whose spouse or dependent is diagnosed with COVID-19 by a CDC-approved test,
  3. who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off, or having work hours reduced due to COVID-19,
  4. who is unable to work due to COVID-19 childcare issues,
  5. who has closed or reduced hours in a business owned or operated by the individual due to COVID-19, or
  6. who has experienced other factors as determined by the Secretary of the Treasury.

The administrator of the plan may rely on the individual’s certification that the individual qualifies for a coronavirus-related distribution under these categories.

Loans from Qualified Plans

The $50,000 loan limit, for loans from qualified plans to “qualified individuals” made during the 180-day period from the date of enactment, is increased to $100,000, and the cap of 50% of the present value of the vested benefit is increased to 100% of such present value.

The due date for any repayment by a qualified individual of a participant loan that would occur from the date of enactment through December 31, 2020 is delayed for up to one year. Later repayments for such loans are also adjusted appropriately to reflect the prior delayed due date and any interest accruing during such delay. The delay period is ignored in determining the 5-year maximum period for such loans.

A qualified individual who could be eligible for these expanded loan limits and loan delays is one who could meet the same coronavirus-related tests as discussed above for coronavirus-related distributions.

Required Minimum Distributions (RMDs)

Minimum distributions otherwise required in 2020 from defined contribution plans need not be made. Minimum distributions with required beginning dates in calendar year 2020, which have not yet been made by January 1, 2020, and which are required from defined contribution plans, need not be made in 2020.

This waiver is applicable to:

  1. defined contribution 401(a) qualified plans,
  2. defined contribution 403(a) and 403(b) plans,
  3. governmental defined contribution 457(b) plans, and
  4. individual retirement accounts.

If this provision is treated in the same manner as the analogous 2009 relief, a plan sponsor may have discretion as to whether it should be adopted.

Plan amendments for these provisions are not required until the last day of the first plan year beginning on or after January 1, 2022 (January 1, 2024 for governmental plans).

If you have already taken your RMD, please contact your AAFCPAs Tax Partner to discuss options regarding recontributing the RMD to your qualified plan.

Plan Amendments

A plan may be amended to provide for these expanded distribution and loan options. Plan amendments for both the coronavirus-related distribution and plan loan provisions need not be made until at least the last day of the first plan year beginning on or after January 1, 2022. The due date for amendments to governmental plans is two years later than such date.

Defined Benefit Plan Funding Requirements

Single employer defined benefit plan funding requirements for 2020, including quarterly contributions, may be deferred until January 1, 2021, at which time they must be paid with interest. In determining the application of benefit restrictions in plan years containing the 2020 calendar year, a plan sponsor may elect to apply the plan’s 2019 funded status.


AAFCPAs has formed a Task Force dedicated to studying and advising clients on the business implications of the Coronavirus Aid, Relief and Economic Stimulus (CARES) Act legislation, signed by President Trump on Friday, March 27th, 2020. Our CARES Task Force includes senior leadership and advisors from diverse segments of our organization, including our Employee Benefit Plan Audit practice.

AAFCPAs will continue to monitor communications from the IRS, the Treasury Department, and the MA DOR and will keep you informed as changes occur or become clarified.

If you have any questions about these retirement plan provisions, ERISA compliance, or the CARES Act please contact Davide Villani, CPA, Partner of AAFCPAs’ Employee Benefit Plan Practice, at 774.512.4012,; or your AAFCPAs Partner.

This commentary on this website reflects the personal opinions, viewpoints and analyses of the AAFCPAs Wealth Management, LLC employees providing such comments, and should not be regarded as a description of advisory services provided by AAFCPAs Wealth Management, LLC or performance returns of any AAFCPAs Wealth Management, LLC client. The views reflected in our commentaries are subject to change at any time without notice. Nothing on this page constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. AAFCPAs Wealth Management, LLC manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.

About the Author

Davide Villani CPA
Davide is a leader of AAFCPAs’ specialized Employee Benefit Plan Audit & Consulting Practice with extensive expertise in ERISA standards. He provides meaningful audits, done efficiently by a dedicated employee benefit plan audit practice within a 300-person CPA & consulting firm, and with access as needed to the resources of PrimeGlobal, the 4th largest CPA firm network globally. He audits and advises plan sponsors on ERISA compliance requirements, including those associated with administering 401K, 403B, Defined Benefit, and Health & Welfare Plans. He provides proactive guidance to retirement plan fiduciaries, which helps to protect the financial integrity of employee benefit plans. He reviews the Form 5500 to confirm that investments reflect accurately in the financial information, and that you are operating the plan confidently in compliance with ERISA reporting and fiduciary requirements.