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CARES Act Includes Penalty-Free Distributions and changes to participant loan provisions and repayment requirements

The Coronavirus, Aid, Relief and Economic Security (CARES) Act recently signed into law earmarks more than $2 trillion to individuals and businesses and provides other financial assistance as compensation for those affected by the COVID-19 pandemic. It includes several changes to retirement accounts/plans.

If you experience adverse financial consequences due to being quarantined, furloughed, laid off or having work hours reduced and/or being unable to work due to a lack of childcare, you may be eligible for financial help.

You may request penalty-free distributions of up to $100,000 for qualifying coronavirus-related reasons under the CARES Act.

  • Tax on the income from the withdrawal may be paid over a three-year period;
  • Participants may repay the amount withdrawn to an eligible retirement plan within three years;
  • Repayments will not be subject to the retirement plan contribution limits; and
  • All contribution sources (other than money purchase pension plan sources) will be available.

The CARES Act increases the maximum loan limit for qualified individuals, who have been impacted by COVID-19, for loans taken within 180 days of the date of enactment. Also, it extends the due date of any qualified individual’s loan repayment that would otherwise be due during 2020 (but on or after the date of enactment) for one year.

  • Increase the maximum loan limit generally up to the lesser of 100% of the vested account balance or $100,000 for loans made to qualifying participants from March 27, 2020 through September 23, 2020.
  • Allow qualifying participants to delay loan repayments that would otherwise be due between March 27, 2020 and December 31, 2020 (“deferment”)

For additional information on withdrawal and loan changes under the CARES Act, please log in to the Fidelity website at www.netbenefits.com. Go to the Quick Links drop down menu and select "Loans and Withdrawals" for more information. You can also call the Fidelity Retirement Benefits line at 800.343.0860 and ask to speak with someone who can provide information about CARES Act loan provisions.