Stimulus Bill

In a continuing effort to alleviate taxpayer stress from the COVID-19 pandemic, another piece of federal legislation will provide relief in several categories. The Stimulus Bill, also called The Coronavirus, Aid, Relief and Economic Security (CARES) Act or H.R. 748, was passed by the House and signed on Friday, March 27, 2020. Below are some of the most pertinent sections for financial professionals and their clients (not intended as legal advice):


Temporary Waiver of Required Minimum Distribution (RMD) Rules
The CARES Act waives RMDs for calendar year 2020 for Defined Contribution (DC) plans, including 401(k), 403(b), 457(b) and IRA plans, allowing individuals to keep funds in their retirement plans. Under current law, individuals generally at age 72, or those that turned 70 ½ in 2019 or before, must take an RMD from their DC plans and IRAs. 

If a client has taken an RMD within the past 60 days, the RMD would be eligible to roll back into the plan. Typically, RMDs are not eligible to be rolled over in a year in which an RMD is required. However, since no 2020 RMD is required, a 60 day rollover is an option. We do not yet know what this means for individuals who took 2020 RMDs outside of the 60 day window, but expect to receive additional guidance from the IRS and will pass this along when we know more. In addition, as we hear more from our clearing firm partners on how this will affect Pershing and FCCS accounts, we will post that information on our COVID-19 Clearing Firm Updates Page.

Hardship Distributions
H.R. 748 also waives the 10% early withdrawal penalty tax under Internal Revenue Code Section 72(t) on early withdrawals up to $100,000 from a retirement plan or IRA for an individual:

  • who is diagnosed with COVID-19;
  • whose spouse or dependent is diagnosed with COVID-19; 
  • who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to COVID-19; or
  • other factors as determined by the Treasury Secretary.

Plan Loans
The Act doubles the current retirement plan loan limits to the lesser of $100,000 or 100% of the participant’s vested account balance in the plan. Individuals with an outstanding loan from their plan with a repayment due from the date of enactment of the CARES Act through Dec. 31, 2020, can delay their loan repayment(s) for up to one year. The legislation allows retirement plans to adopt these rules immediately, even if the plan does not currently allow for hardship distributions or loans. This provision requires that the plan be amended on or before the last day of the first plan year beginning on or after Jan. 1, 2020.

The American Retirement Association (ARA) has put together FAQs outlining the above changes, available here.

Other Provisions
The CARES Act provides the Department of Labor (DOL) with expanded authority to postpone certain deadlines under ERISA. This means that the DOL could delay such timelines as Form 5500 filing, plan restatement deadlines, etc. We will continue to update you as additional changes occur.

Small Business Relief
The Act also provides relief to your small business clients provided they meet certain requirements. The program, which is available to businesses with less than 500 employees that do not lay off employees during the crisis, is in the form of $350 billion in partially forgivable loans. Provisions of the program include a 50% refundable payroll tax credit on worker wages to retain workers, a delay in employer-side payroll taxes for Social Security until 2021 and 2022, looser net operating loss-reduction rules, and an expansion of rules that allows sole proprietors and other self-employed workers to be eligible for the expanded unemployment-insurance benefits the bill provides. Loans under the program will be up to $10 million per employer depending on payroll, and will carry an interest rate of up to 4%. If the business uses the loan funds for the approved purposes and maintains the average size of its full-time workforce based on when it received the loan, the principal of the loan will be forgiven, meaning the company will only need to pay back the interest accrued.

By: Ryan Nietert, CFP, ChFC, CLU. Oakcrest Capital March 30th, 2020