August 31, 2020
Distribution and Loans Under Covid-19 - Rules Expanded
August 31, 2020
The Internal Revenue Service (IRS) has announced it is extending relief to plan participants whose spouses are laid off and who take COVID-related distributions or loans from their retirement accounts.
The IRS in Notice 2020-50 (Notice) expands the categories of individuals eligible for COVID-19 distributions and loans.
New definition of a qualified individual is anyone who is:
- A person is diagnosed with 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
- A person whose spouse or dependent is diagnosed with the virus by a test approved by the Centers for Disease Control and Prevention. This includes a test authorized under the Federal Food, Drug, and Cosmetic Act OR
- A person who experiences adverse financial consequences because the individual, the individual’s spouse, or a member of the individual’s household experienced any of the following due to COVID-19:
- Being quarantined
- Being furloughed
- Being laid off
- Having work hours reduced
- Not being unable to work due to lack of childcare
- Closing or reducing hours of a business that they own or operate
- Reduced pay or self-employment income
- Having a job offer rescinded or start date for a job delayed
The Notice clarifies that employers can choose whether to implement these coronavirus-related distribution and loan rules.
Qualified individuals can claim the tax benefits of coronavirus-related distribution rules even if plan provisions aren’t changed and employers can rely on an individual’s certification that they are truly designated as a qualified individual. . In any event, Individuals should provide their employer with the certification.
Please check with your administrator at BEI to help you successfully navigate way through these rules, should you have employees impacted by COVID-19.
Author: Robert Gorelick, APA, Founder Benefit Equity Inc.