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03.27.20   |   COVID-19, Insights

The CARES Act Brings Changes to Retirement and Other Benefit Plans

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This afternoon, the Coronavirus Aid, Relief and Economic Security (CARES) Act passed the House of Representatives by voice vote, with a formal signature by the President expected imminently.

We address some of the key takeaways regarding retirement and health and welfare plans below.  The most urgent item added by the CARES Act is likely to be the $100,000 distribution option from retirement plans. 

$100,000 Hardship distribution option:

  • The CARES Act allows eligible participants to request penalty-free distributions of up to $100,000 for qualifying coronavirus-related reasons. These include adverse financial consequences due to being quarantined, furloughed, laid off or having work hours reduced; being unable to work due to a lack of childcare; or closing or reducing hours of a business owned or operated by the individual. CARES Act Distributions are more favorable than hardship withdrawals—including those for Federal Emergency Management Agency (FEMA)-declared disasters—because:
    • Tax on the income from the withdrawal may be paid over a three-year period;
    • Participants may repay the amount withdrawn to an eligible retirement plan within three years;
    • Repayments will not be subject to the retirement plan contribution limits; and
    • All contribution sources (other than money purchase pension plan sources) will be available.
  • Many retirement plan service providers are automatically implementing special distribution rights as a result of the CARES Act unless the client opts out, so action may be required just to preserve the current status quo. 

Other retirement- and benefits-related changes include::

  • Waive the required minimum distribution rules for certain defined contribution plans and IRAs for calendar year 2020.
  • Amend ERISA § 518 to expand the DOL’s authority to postpone certain filing deadlines.
  • Provide single-employer plans extra time to meet their funding obligations by delaying the due date for any contribution otherwise due during 2020 until January 1, 2021.
  • Provide an exclusion for certain employer payments of student loans. 
  • Apply cooperative and small employer charity (CSEC) pension plan rules to certain charitable employers whose primary exempt purpose is providing services with respect to mothers and children.
  • Allow a high-deductible health plan (HDHP) with a health savings account (HSA) to cover telehealth services prior to a patient reaching the deductible. The bill would also expand telehealth access for Medicare beneficiaries.
  • Allow patients to use funds in health savings accounts (HSAs), Archer medical savings accounts (Archer MSAs), and flexible spending accounts (FSAs) to reimburse for certain over-the-counter products.
  • Require the Department of Health and Human Services (HHS) to issue guidance on what patient records are allowed to be shared during the public health emergency related to the coronavirus.
  • Create a limit on paid Family and Medical Leave (FMLA), under which, an employer would not be required to pay more than $200 per day and $10,000 in the aggregate for each employee.
  • Create a limit on paid sick leave, under which, an employer would not be required to pay more than $511 per day and $5,110 in the aggregate for sick leave, or more than $200 per day and $2,000 in the aggregate to care for a quarantined individual or child for each employee.
  • Increase Medicare payments to hospitals treating a patient admitted with coronavirus. 

Please do not hesitate to contact the attorneys at Critchfield with questions related to the content of this alert.

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