In late June, the IRS released Notice 2020-50, which offers an expanded definition on who is qualified to take advantage of the CARES Act provisions relating to retirement plan* distributions and plan loans. This expanded definition seeks to provide further relief to those affected by COVID-19.
As expanded under Notice 2020-50, 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 child care 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- having a job offer rescinded or start date for a job delayed due to COVID-19.
Notice 2020-50 also provides further clarification on plan loan amounts and repayment terms administration:
- Suspension period only applies to payments due between March 27, 2020 and December 31, 2020.
- Loan payments delinquent prior to these dates are not covered by the CARES Act.
- All loan payments must resume after the end of the suspension period—no later than January 1, 2021.
- The loan can be re-amortized to reflect a final payment/due date with a new due date—not to exceed one year after the original loan terms.
- Loan payment suspension is only available to qualified individuals and requires a signed self-certification form.
To stay up to date regarding COVID-19 related items, check out our CARES Act Resources page.
Important note: Money Purchase Plan (MPP) funds do not qualify for CARES Act relief.