Neither the IRS nor the TSP has yet issued implementing guidance on the provisions, but they are effective retroactive to the beginning of this year. Image: Alones/Shutterstock.com
Following is a question and answer document released by the Senate Finance Committee on the provisions of a recently enacted Coronavirus relief measure (the “CARES Act”) that affects the TSP and similar programs; however, neither the IRS nor the TSP has yet issued implementing guidance on the provisions, but they are effective retroactive to the beginning of this year.
A: Generally, if the account is in an eligible retirement plan, the plan may permit you to take a coronavirus-related distribution if:
· You, your spouse, or dependent has been diagnosed with the coronavirus (i.e., SARS-CoV-2 or COVID-19),
· You have experienced adverse financial consequences because you have been quarantined, furloughed, laid off, or have had work hours reduced due to the coronavirus,
· You are unable to work because of a lack of child care due to the coronavirus,
· You own or operate a business and have had to close or reduce hours due to the coronavirus, or
· You have experienced an adverse financial consequence due to other factors as provided in guidance issued by the Internal Revenue Service.
A: Yes. During 2020, you may withdraw up to a total of $100,000 in coronavirus-related distributions from accounts in eligible retirement plans.
A: The special withdrawal rules apply to eligible retirement plans, which include individual retirement accounts and annuities (IRAs), qualified pension, profit-sharing, or stock bonus plans (including 401(k) plans), qualified 403(a) annuity plans, 403(b) annuity contracts and custodial accounts, and governmental section 457 deferred compensation plans.
A: No. The 10-percent tax penalty that generally applies to early withdrawals from a retirement account if you are younger than 59½ does not apply to coronavirus-related distributions under the CARES Act.
A: Coronavirus distributions are available throughout 2020. The CARES Act retroactively waived the 10-percent early withdrawal tax penalty for coronavirus-related distributions made on or after January 1, 2020 and before December 31, 2020.
A: Yes. However, the tax associated with the distributions may be paid ratably over three years, beginning with taxable year 2020.
A: Generally, yes. The CARES Act allows you to recontribute the funds you withdrew to an eligible retirement plan (to which you can make a rollover contribution) in one or more payments within three years. The recontributed amounts will not count toward the maximum contribution limit in the year that the funds are recontributed to a tax-deferred retirement account.
A: Yes. For loans taken from an eligible retirement plan within six months of enactment of the CARES Act, limits on loans from such retirement plans are doubled, from $50,000 to $100,000, and are capped at 100 percent of the vested account balance (rather than 50 percent) in the plan. Plans are not required to increase these limits, but the CARES Act provides the flexibility for plans to do so.
In addition, for qualifying individuals (see Q&A1) who have an outstanding loan on or after March 27, 2020 (the date of enactment of the CARES Act) from an eligible retirement plan, any repayment of the loan due between March 27, 2020 and December 31, 2020 may be delayed for one year (with any subsequent repayments (and interest) adjusted to reflect such delay in repayment).
A: No. Provided that your account is an IRA, 401(k) plan, 403(b) plan or other defined contribution plan, all required minimum distributions for these plans have been waived for 2020.
A: No. All required minimum distributions for defined contribution plans have been waived for 2020, including your first RMD (provided that you had not already taken the distribution before January 1, 2020).
A: The IRS is expected to provide guidance regarding the retirement-related provisions, which will be available on the IRS.gov website
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