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What the act says about coronavirus-related loans

Frequently Asked Questions

The ability to receive a coronavirus-related loan distribution expired on 9/22/20. Prior to that time, if the plan had decided to make coronavirus-related loans available, participant eligibility requirements were 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    • The individual having a reduction in pay (or self-employment income) due to COVID-19 or having a job offer rescinded or start date for a job delayed due to COVID-19;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care due to COVID-19, having a reduction in pay (or self-employment income) due to COVID-19, or having a job offer rescinded or start date for a job delayed due to COVID-19; or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.

The ability to receive a coronavirus-related loan distribution expired on 9/22/20. Prior to that time, for a participant to be eligible, their plan must have allowed loans, must have opted to make coronavirus-related loans available, and participants must have met a coronavirus-related eligibility requirement. For these participants:
  • The eligible maximum loan limits were increased from $50,000 or 50% of vested account balances to $100,000 or all of the vested account balance. Collateralized loan limits were lower because of the need to hold 110% collateral on those loans.
  • Any coronavirus-related loans had to be initiated between March 27 and September 14, 2020 in order for the distribution to be made by the September 22, 2020 expiration date.
  • The number of loans allowed and the amount participants may borrow were not impacted by the CARES Act. They remained the same as what was 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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