How the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Impacts your Retirement Plans at WashU
The legislation passed on March 27th is a $2.2 trillion relief bill to counter the economic impact of the COVID-19 pandemic. Effective Monday, April 6th, the following changes will go into effect for the 403(b) Retirement Savings Plan:
COVID-19-related distributions will be permitted, with favorable tax treatment.
- The CARES Act waives the 10% early withdrawal penalty tax for distributions of up to $100,000 per year from retirement plans/IRAs.
- To qualify for this distribution, you must have been diagnosed with COVID-19, have a spouse or dependent who has been diagnosed with COVID-19, or have experienced adverse financial consequences as a result of being quarantined, furloughed, laid-off, reduced work hours, inability to work due to lack of child care because of COVID-19, the closing or reducing hours of a business owned or operated due to COVID-19, or other factors, as determined by the Treasury Secretary.
- These distributions are still subject to income tax, but taxes can be paid ratably over a three-year period.
- You will have the ability to repay the amount into the Plan over the next three years.
- The distribution is not subject to the 20% mandatory tax withholding, but you can elect to withhold taxes from the distribution.
Loan limits will be increased, and you may delay existing loan repayments.
- You may take a loan of up to $100,000 from your retirement plan. This entire amount may not be available to you, as there are still collateral requirements. TIAA can help you calculate the amount of loan available.
- Loan repayment due dates through December 31, 2020, are extended by one year, with the term of the loan being extended by one year as well.
- You may still elect to pay your loan on time, but you will not be penalized if you are up to one year late for each payment due during this period.
Required Minimum Distributions (RMDs) are waived for 2020.
- If you have already taken your 2020 distribution, you are still responsible for taxes due on that distribution for 2020.
- TIAA will continue all monthly payouts in 2020, unless you otherwise direct them to stop.
- All annual payouts will be suspended in May of 2020, unless you contact them to have it continued.
- If your first RMD is due in 2020, you will have to take two RMDs in 2021.
- This does not apply to the 457(b) Deferred Compensation Plan.
TIAA is administering all of these provisions for the WashU plan. If you have any questions, please contact the WashU/TIAA Service Center at 888-488-3419.