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CARES Act Retirement Provisions Frequently Asked Questions

Do you have questions about the CARES Act? Here are some frequently asked questions and answers to help you navigate this new legislation.


What is the Coronavirus Aid, Relief, and Economic Security (CARES) Act?

The CARES Act is a $2 trillion stimulus bill that is intended to help with a variety of issues resulting from the widespread COVID-19 virus, also known as the novel coronavirus. Several provisions in the Act will expand access to retirement plan assets due to the COVID-19 pandemic. The changes go into effect immediately; however, this is an optional benefit that may be—but is not required to be—made available by plan sponsors.

What types of accounts are covered by the CARES Act?

Individual retirement accounts (IRAs) and annuities; qualified profit-sharing or stock bonus plans (including 401(k) plans); qualified 403(a) annuity plans; 403(b) annuity contracts and custodial accounts; and governmental section 457 deferred compensation plans are covered.

What should I consider when deciding whether to take advantage of the provisions?

Everyone’s situation is unique, but you’ll want to consider the taxes that will be due as part of your annual income tax filing. Employees will also want to weigh the advantages and risks of the loss of compound growth from withdrawn funds.

Where can I get more information on the retirement-related provisions in the CARES Act?

You can see the full Act by clicking here, or you can reach out to your employer for more information.


I need to withdraw money from my retirement account to cover expenses related to the health emergency. Am I eligible?

Yes. The CARES Act waives the 10 percent early withdrawal penalty tax that’s typically applied to withdrawals taken by people under the age of 59 1/2 for withdrawals between January 1, 2020, and December 31, 2020. This waiver applies to early withdrawals up to $100,000 from a retirement plan or individual retirement account (IRA), and for an individual who has a COVID-19 event, defined as a person:

  • who has been diagnosed with COVID-19;
  • whose spouse or dependent has been diagnosed with COVID-19;
  • who experiences adverse financial consequences resulting from COVID-19, including being quarantined, furloughed, laid off, having work hours reduced, experiencing COVID-19-related childcare issues that impede one’s ability to work, or the closing or reduction of hours of a business owned or operated by an individual impacted by COVID-19; and
  • other factors as determined by the Treasury Secretary.

When can I receive coronavirus-related distributions under the CARES Act provisions?

From January 1, 2020, through December 31, 2020.

Will I have to pay the 10 percent early withdrawal penalty if I take a coronavirus-related distribution?

No. The CARES Act waives the 10 percent early withdrawal penalty tax that’s typically applied to withdrawals taken by people under the age of 59 1/2 for withdrawals between January 1, 2020, and December 31, 2020.

Is there a cap on how much I can withdraw?

$100,000 is the limit to avoid the 10 percent penalty.

Do I have to pay income taxes on these distributions?

Yes. However, the CARES Act legislation permits individuals who have taken distributions to pay the ordinary income taxes that would be due on the distribution over a three-year period.

Can I recontribute the withdrawn funds to my retirement account?

Yes. The CARES Act allows individuals to repay the amount withdrawn back into the plan, prorated and over the next three years so that they can replenish their retirement savings. Those repayments would not be subject to the retirement plan contribution limits. Participants who decide to repay the distribution can take credits on their tax returns.


Who is eligible to take advantage of the changes regarding retirement plan loans?

Like distributions, if an eligible plan adopts these rules, the changes will apply for individuals who have had a COVID-19 event, as defined above.

Are there any changes regarding loan limits?

Yes. The Act temporarily increases the maximum amount available that a participant can borrow, from $50,000 to $100,000, from his or her plan account balance. The Act also allows participants to borrow up to the lesser of $100,000 or 100 percent of his or her account balance, rather than the 50 percent limit under current rules. These loan limit increases are in effect for 180 days following the signing of the bill into law on March 27, 2020.

Are there any changes to loan repayments or schedules?

The Act provides a one-year extension for any loan payment due between now and December 31, 2020. It appears that remaining payments, plus applicable interest, can be re-amortized over the extended period.

Required Minimum Distributions

Am I required to take a required minimum distribution (RMD) from my retirement account this year?

No. The CARES Act waives RMDs for calendar year 2020 for defined contribution plans, including 401(k), 403(b), and 457(b), as well as IRAs, allowing individuals to keep funds in their retirement plans. This includes anyone who turned 70 1/2 last year and is supposed to take his or her first RMD on April 1, 2020.

I already received my RMD earlier in 2020. Do I have any options?

If a person received an RMD on January 1, 2020, or later, they can return or roll over their RMD back into the eligible plan or IRA to avoid taxation for 2020.

Have questions? Need help? Call the CAPTRUST Advice Desk at 800.967.9948 or schedule an appointment with a retirement counselor today.

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