On March 27, 2020 President Trump signed the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).  Among many other provisions, the CARES Act allows participants affected by the coronavirus pandemic to have greater access to retirement funds.  The new law loosens the in-service distribution restrictions that apply to many retirement plans and significantly eases the tax burden on qualified individuals who take distributions from qualified retirement plans or IRAs.

The CARES Act also (i) for qualified individuals, expands the qualified plan loan rules; and (ii) for all retirement plan participants and IRA owners – following a cue from relief issued after the 2008 financial collapse – temporarily waives required minimum distributions from defined contribution plans and IRAs for 2020.  Employers with defined benefit plans may delay required contributions and may use their plan’s prior funding status for purposes of funding-based restrictions on benefits and amendments.

Qualified Individuals
The most significant retirement plan changes in the CARES Act are intended to help plan participants. The CARES Act introduces coronavirus-related distributions and expands participant loans for qualified individuals, as defined as follows:

  • has been diagnosed with COVID-19;
  • has a spouse or dependent(s) diagnosed with COVID-19; or
  • experiences adverse financial consequences due to COVID-19 resulting from
    • being quarantined, furloughed, or laid off;
    • having their work hours reduced;
    • being unable to work due to lack of child care; or
    • closing or reducing hours of a business the individual owns or operates.

A plan administrator may rely on a participant’s certification that they satisfy the requirements to be a qualified individual. No documentation is required.

In-Service Distributions Allowed. Normally, participants who are still employed are restricted from taking distributions from 401(k), 403(b) and 457(b) plans. The CARES Act allows plan sponsors to permit qualified individuals to take “coronavirus-related distributions” through Dec. 31, 2020. The aggregate amount of all coronavirus-related distributions made to a qualified individual by a single plan (or by multiple plans maintained by a single plan sponsor or members of a single controlled group) cannot exceed $100,000.

Tax Treatment of Coronavirus-Related Distributions
The CARES Act permits distributions from Jan, 1, 2020 to Dec. 31, 2020 to qualified individuals of up to $100,000. In addition, the 10% early withdrawl penalty for such distributions is waived and the 20% federal income tax withholding can be ignored. The distribution can be rapaid to the plan within three years to gain tax-free rollover treatment. Taxable amounts required to be included in gross income can be spread over a three-year period.

Increased Loan Amounts and Delayed Repayment
For retirement plan loans to qualified individuals made between March 27 and Sept. 23, 2020, the CARES Act:

  • Increases the maximum loan amount from $50,000 to $100,000; and
  • Allows participants to take the full amount of their vested benefit as a loan, rather than limiting the loan amount to 50% of their vested balance

The CARES Act also delays the due date for loan repayments for qualified individuals that are due between March 27 and Dec. 31, 2020 for one year, and extends the maximum five-year repayment period accordingly.

Waiver of Required Minimum Distributions (RMDs)
The CARES Act waives all RMDs which would otherwise be due during the 2020 calendar year, including the 2019 initial RMDs which would otherwise have been due by April 1, 2020.

The CARES Act also extends by one year the period over which distributions must be made due to an employee’s or IRA owner’s death.

Modifies Plan Amendments and Compliance Deadlines
Employers may start using CARES Act retirement plan provisions immediately. Plan amendments for adopting relief under the CARES Act would be due no later than the last day of the first plan year beginning on or after Jan. 1, 2022. The CARES Act also gives the U.S. Department of Labor authority to postpone certain deadlines that apply to ERISA-covered plans. Any postponements must be due to a public emergency declared by the U.S. Department of Health and Human Services. This provision includes the current public emergency for COVID-19.


Coronavirus, Aid, Relief and Economic Security (CARES) Act FAQ



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The Small Business Retirement Marketplace is administered by the Washington Department of Commerce as established in RCW Chapter 43.330.730-750. Plans carried on the Retirement Marketplace are verified by the Department of Financial Institutions and/or the Office of the Insurance Commissioner to meet the requirements set forth in RCW 43.330.732(7) and 735(6)(a).

Enrollment in plans on the Retirement Marketplace is voluntary. Plan enrollment is managed by private financial services firms. Saving through certain plans will not be appropriate for all individuals. Employer facilitation of most retirement savings plans carries certain legal obligations for which employers are entirely responsible. Contributing to a retirement savings plan may offer tax benefits and/or consequences. Other private sector plans not offered on the Retirement Marketplace may charge lower fees. Consult your tax or financial adviser with questions related to investments.

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