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Employee Benefits Highlights of the Coronavirus Aid, Relief and Economic Security Act

The Coronavirus Aid, Relief and Economic Security Act (CARES Act) helps employees manage the financial burdens associated with efforts to contain the coronavirus during this pandemic. The employee benefit highlights of the CARES Act include:

Special Coronavirus-Related Distributions

IRAs, 401(k), 403(b) and governmental 457(b) plans may (but are not required to) allow eligible individuals to take “coronavirus-related distributions” of up to $100,000 until December 31, 2020.

A coronavirus-related distribution is a distribution taken by someone who:

  • Is diagnosed with COVID-19 by a test approved by the Centers for Disease Control and Prevention,
  • Has a spouse or dependent diagnosed with COVID-19, or
  • Experiences financial adversity as a result of quarantine, furlough, lay off or reduced hours; inability to work due to lack of child care; closure or reduced operating hours of a business owned or operated by the participant; or other factors determined by the Internal Revenue Service (IRS).

A coronavirus-related distribution is not subject to the 10% penalty tax that normally applies to distributions before age 59 1/2, and is not subject to mandatory 20% income tax withholding.

Although a coronavirus-related distribution is taxable income unless repaid, the distribution may be included in taxable income spread over a three-year period.

A coronavirus-related distribution may be repaid to the plan or to an IRA within three years after being taken, in which case the distribution is not taxable income. There is no interest charge on repaid distributions.

Liberalized Plan Loans

Until September 27, 2020, a retirement plan may (but is not required to) increase the limit on plan loans to $100,000, or the employee's vested account balance, if less. This replaces the normal limit of $50,000, or 50%, of the employee's vested balance.

An employee with any loan payments due between March 27, 2020, and December 31, 2020, who qualifies for a special coronavirus-related distribution as explained above, must be given a one-year extension on those loan payments. The schedule for loan payments due after 2020 is readjusted to reflect the delay during 2020. This means that a qualifying employee can take a loan in 2020 and does not have to start repaying the loan for a year.

Waiver of Required Minimum Distributions in 2020

Required minimum distributions (RMDs) from an IRA, 401(k), 403(b) or governmental 457(b) plan that are required to be taken in 2020 may be waived without penalty. 

Defined Benefit Plan Minimum Funding Contribution Delay

The sponsor of a single-employer defined benefit pension plan may delay until January 1, 2021, any minimum funding contributions (including quarterly contributions) that are otherwise required to be made in 2020. Interest has to be included on any delayed contribution.

A pension plan can disregard 2020 market losses on plan assets and use 2019 valuations when determining its adjusted funded target attainment percentage. That could help avoid triggering certain statutory plan restrictions that would take effect if 2020 market losses had to be counted. 

Plan Amendments

Plan amendments to reflect coronavirus-related distributions, plan loan changes and RMD waivers are required, but they do not have to be adopted until the last day of the 2022 plan year.

High Deductible Health Plans

Before the CARES Act, the IRS announced that Health Savings Account-eligible high deductible health plans (HDHPs) could cover coronavirus-related testing and treatment on the same terms as preventive care, meaning no requirement to first meet the annual deductible. The CARES Act extends similar rules to telehealth or other remote health care services covered by an HDHP.

We expect clarifying guidance will be issued by the IRS and U.S. Department of Labor in the weeks ahead.

In the meantime, feel free to contact the Gordon Feinblatt Benefits team if you have any questions or need guidance on these or any other employee benefits issues.

For additional information on the impact of the coronavirus, visit our information hub for a list of up-to-date content.


Matthew P. Mellin
410-576-4047 •


March 31, 2020




Mellin, Matthew P.