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What the act says about coronavirus-related withdrawals

Frequently Asked Questions

If the plan has decided to make coronavirus-related withdrawals available, participant eligibility requirements are as follows.
Participants who are diagnosed with COVID-19 via a CDC-approved test, or who have a spouse or dependent child diagnosed with COVID-19; or participants who experience adverse financial consequences as a result of the virus due to:
 
  • Being quarantined
  • Being furloughed, laid off, or having work hours reduced as a result of the virus or disease
  • Being unable to work due to lack of child care due to such virus or disease
  • Closing or reducing hours of a business owned by such individual as a result of
    such virus or disease
  • Other factors as determined by the Secretary of the Treasury or his delegate

If the plan has decided to make coronavirus-related withdrawals available, participants may take up to an aggregate of $100,000 in coronavirus-related withdrawals from eligible retirement plan accounts and IRAs without the 10% early withdrawal penalty or 20% mandatory withholding. The distribution can be made through December 31, 2020.
If the plan has decided to make coronavirus-related withdrawals available, the tax and penalty implications are as follows.
 
  • The 10% early withdrawal penalty is waived.
  • There is no 20% mandatory federal tax withholding required at the time of distribution.
  • Withdrawals will be taxed based on whether the participant originally contributed money to their account before or after paying taxes on it. With a pretax account, the participant’s contributions, any employer match and earnings are taxable. For after-tax accounts, they already paid taxes on contributions, so only earnings are taxable.
  • The participants can spread their tax obligation over three (3) years unless they elect immediate taxation.
Remember to remind participants to speak with their financial advisor and/or tax consultant.
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