On June 19, 2020, the IRS issued Notice 2020-50 that expands the categories of individuals eligible for plan distributions and plan loans under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Expanded Definition of “Qualified Individual” for Coronavirus-related Distributions
The Coronavirus-related distributable event is the new distribution option for 2020 that plan sponsors can add to their plan under the CARES Act. The guidance added new factors that can be taken into consideration. The new factors for Coronavirus-related distributions are:
- Reductions in pay
- Rescissions of job offers
- An individual’s delayed start date
- Adverse financial consequences to an individual arising from the impact of the COVID-19 coronavirus on an individual’s spouse or household member
Under the new guidance, a participant qualifies if they meet one of the following criteria:
- Participant is diagnosed with COVID-19 by a test approved by the Centers for Disease Control and Prevention
- Participant’s spouse or dependent is diagnosed with COVID-19 by a test approved by the Centers for Disease Control and Prevention
- Participant, participant’s spouse, or a member of the participant’s household experiences the following due to COVID-19:
- being quarantined
- being furloughed
- being laid off
- having work hours reduced
- unable to work due to lack of child care
- 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- having a job offer rescinded or start date for a job delayed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 expanded rules also apply to those qualifying for COVID-19 plan loans. The Notice clarified that implementing the coronavirus distributions and/or loans is discretionary. Further, plan administrators can rely on the individual’s certification that they qualify.
Below are links to other recent articles written by your Retirement Plan Services Team.
- Impact of the CARES Act on Employer Sponsored Defined Contribution Plans
- Plan Options for COVID-19 Impacted Businesses
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