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What the act says about coronavirus-related loans

Frequently Asked Questions

If the plan has decided to make coronavirus-related loans 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  • the individual having a reduction in pay (or self-employment income) due to COVID-19 or having a job offer rescinded or start date for a job delayed due to COVID-19;
  • the individual’s spouse or a member of the individual’s household (as defined below) being quarantined, being furloughed or laid off, or having work hours reduced due to COVID-19, being unable to work due to lack of child care due to COVID-19, having a reduction in pay (or self-employment income) due to COVID-19, or having a job offer rescinded or start date for a job delayed due to COVID-19; or
  • closing or reducing hours of a business owned or operated by the individual’s spouse or a member of the individual’s household due to COVID-19.
  • Other factors as determined by the Secretary of the Treasury or his delegate.
In this context, a "member of the individual’s household" is someone who shares the individual’s principal residence.

To be eligible, the plan must allow loans, must have opted to make coronavirus-related loans available, and participants must meet a coronavirus-related eligibility requirement. For these participants:
 
  • The eligible maximum loan limits have increased from $50,000 or 50% of vested account balances to $100,000 or all of the vested account balance. Collateralized loan limits will be lower because of the need to hold 110% collateral on those loans.
  • Any coronavirus-related loans must be initiated between March 27 and September 22, 2020.
  • The number of loans allowed and the amount participants may borrow are not impacted by the CARES Act. They remain the same as what is already stated in the plan document.
  • Any participant repaying an existing retirement plan loan as of the CARES Act effective date of March 27, 2020, through December 31, 2020, may elect to suspend payments through the end of 2020.

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