Retirement Plan Legislative Update: Act 3 – The CARES Act

Posted By: Christopher Ciminera, CPA

Retirement Plan Legislative: CARES ActAct 3 – The CARES Act

In the last blog, we covered the remainder of the SECURE Act provisions. By itself, it changed the landscape of our play. But an unexpected storm came in the form of the COVID-19 pandemic creating a major cloud of uncertainty. The COVID-19 pandemic created the need for expanded legislation to allow more leeway for affected participants to get needed funds from their retirement plans. The legislation that passed and signed into law on March 27, 2020 was the CARES Act.

Scene 1 – Changes

The CARES Act provided for coronavirus-related distributions, expanded loan provisions, and the suspension of required minimum distributions.

Coronavirus-related Distributions

The CARES Act defines a coronavirus-related distribution as any distribution from a retirement plan made on or after January 1, 2020 and before December 31, 2020 to a qualified individual. A qualified individual is defined as one that has been diagnosed with the COVID-19 virus, whose spouse or dependent is diagnosed with the virus, or who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to the virus, being unable to work due to lack of child care, closing or reducing hours of a business owned or operated by the individual, or other factors.

Coronavirus-related distributions up to $100,000 were allowed to eligible individuals. An eligible individual who received a coronavirus-related distribution may make contributions back to the plan to repay the distribution amount for the three-year period beginning on the day after the date the distribution was received. The CARES Act allowed the classification of the repayment amount to be treated as an eligible rollover distribution from an eligible retirement plan in a direct trustee-to-trustee transfer within 60 days of the distribution.

An employee may self-certify that he or she satisfies these qualifying conditions, so that the employer does not have to obtain proof of these conditions.

Increase in Loan Provision

In addition to the coronavirus-related distribution, the CARES Act provided for an increase in loan provisions for plans that allow loans. For a loan made during the 180-day period starting on March 27, 2020, the loan limit could be increased from $50,000 to $100,000 up to 100% of the account balance.

Additionally, an individual with an outstanding loan may delay loan repayments starting March 27, 2020 and ending on December 31, 2020 for up to one year. Additionally, this one-year delay is disregarded when considering the five-year repayment period.

Waiver of Required Minimum Distribution

Additionally, for calendar year 2020, the CARES Act waived the required minimum distribution.


The CARES Act brought relief from the COVID-19 pandemic to affected individuals. Although not linked to the COVID-19 pandemic, the IRS then provided some beneficial updates to EPCRS. In our next blog we’ll discuss Act 4 of our play – updates to the Employee Plans Compliance Resolution System.


Summary of this blog series, for your reference:

Photo By: Moktan Productions