Posted By Maria T. Hurd, CPA, RPA
Our first blog about the CARES Act titled Unsaving for Retirement in Pandemic Times discussed the original definition of a Qualifying Individual eligible to take the additional Coronavirus-related loans and distributions. The original definition of a qualified individual applied if the participant in the plan experienced a financial impact, but it made no mention of layoffs, furloughs, or reduced hours affecting the participant’s spouse as factors that would trigger eligibility for COVID loans or distributions. However, a COVID diagnosis to the spouse and dependents of the participant did trigger eligibility for the participant to take a COVID distribution or loan. Internal Revenue Service (IRS) Notice 2020-50, Guidance for Coronavirus-Related Distributions and Loans from Retirement Plans Under the CARES Act, expands the definition of a qualified individual to include reductions in pay, rescissions of job offers, and delayed start dates with respect to the plan participant, the participant’s spouse, or household member.
Under the expanded definition, a qualified individual is anyone who:
- is diagnosed, or whose spouse or dependent is diagnosed, with the virus SARS-CoV-2 or the coronavirus disease 2019 (collectively, “COVID-19”) by a test approved by the Centers for Disease Control and Prevention (including a test authorized under the Federal Food, Drug, and Cosmetic Act); or
- experiences adverse financial consequences as a result of the individual, the individual’s spouse, or a member of the individual’s household (that is, someone who shares the individual’s principal residence):
- being quarantined, being furloughed or laid off, or having work hours reduced due to COVID-19;
- being unable to work due to lack of childcare due to COVID-19;
- closing or reducing hours of a business that they own or operate due to COVID-19;
- having pay or self-employment income reduced due to COVID-19; or
- having a job offer rescinded or start date for a job delayed due to COVID-19.
Blogging about how to Unsave for Retirement is as unprecedented as these pandemic times, but as furloughs, layoffs, and quarantines become a thing of the past, we’ll be discussing how to unbreak our piggy banks. Stay tuned!