CARES Act Distribution and Loan Options

The Coronavirus Aid, Relief, and Economic Security (CARES) Act is new legislation that provides participants with greater access to loans and distributions from their retirement plan accounts for qualifying coronavirus-related reasons.

The CARES Act provides relief for families, individuals, small businesses, and others impacted by the coronavirus (COVID-19) outbreak. For qualified individuals, it makes retirement funds available for emergency spending needs and delays mandatory distributions.

A Qualified Individual under the CARES Act is defined as someone who:

  • Has been diagnosed with SARS-CoV-2 virus or COVID-19 disease
  • Has a spouse or dependent that has been diagnosed with SARS-CoV-2 virus or COVID-19 disease
  • Has experienced adverse financial consequences resulting from quarantine, furlough, layoff, or a reduction in work hours, or
  • Has been unable to work due to lack of childcare.

Please note, a decrease in wages does not deem you a Qualified Individual.

LOANS

Yes, if permitted by the plan, you may be eligible to take a loan. The CARES Act has expanded loan limits within retirement plans. Please refer to your plan’s Summary Plan Description (SPD) for more detail about loans, including how many outstanding loans are permitted. You may review the SPD in the Resource Center when you login to your account at u.bpas.com.

You can determine the available loan amount using the loan modeling link when you login to your account at u.bpas.com. The system will show the eligible amount along with information about a payment schedule. In general, the CARES Act has temporarily increased retirement plan loan limits to the lesser of:

  • 100% of your vested account balance
  • Up to a maximum of $100,000

NOTE: The highest outstanding loan balance from the previous 12 months will decrease the amount you may take for a new loan. For example, if you have an outstanding loan with a balance of $5,000, you would be able to take up to a maximum of $95,000. Please refer to your account at u.bpas.com to determine what loan options and amounts are available to you.

Login to your account at u.bpas.com. Then select Transactions/Loan Modeling and Requests. Please be sure to complete the section certifying you are a qualified individual to avoid delays in processing your request.

The CARES Act loans are available until September 23, 2020. Please be sure all paperwork is submitted prior to September 23, 2020.

DELAY OF LOAN PAYMENTS

Yes, you may delay repayment for both new and existing loan payments due between March 27, 2020 and December 31, 2020 if you’re a Qualified Individual. Interest and fees will continue to accrue on your loan during this period, however. You’ll be required to resume loan payments in January 2021. At this time, your outstanding loan balance will be reamortized to include the delayed payments from 2020, along with the accrued interest and fees* to add an extension of 12 months to the original loan payoff date. *Accrued fees only apply to MyPlanLoan (MPL) loans.

Login to your account at u.bpas.com. Click on Account History, then select Current Loans. Under the title Current Loan, click on CARES Act Loan Extension to launch the online request form. First check the box to certify that you have satisfied one or more of the conditions listed to confirm that you are a qualified individual. Next, read the Summary Explanation of how the CARES Act applies to your Retirement Plan Loan, and check the box provided. Finally, select the three boxes provided to acknowledge your understanding of the Loan Extension Process. Be sure to read the information after the acknowledgments and select Submit. Please select Printer Friendly Page to keep this form for your records and confirmation. Example: I submit the Repayment Extension Form on 4/1/2020 (my original maturity date was 3/31/24). I make no payments from April 2020 through December 2020. Interest and fees continue to accrue from April 2020 through December 2020. On or about January 1, 2021 my loan will be recalculated to determine a new payment amount based on a new maturity date of 3/31/2025 (one year after my original maturity date). In January 2021 I will resume making loan repayments based on this new payment amount, plus any interest and fees* accrued during the deferment period. *Accrued fees only apply to MyPlanLoan (MPL) loans.

You may request a delay in payments at any time before December 31, 2020. However, it is important to note you are only eligible to delay loan repayments that would have been due between March 27 and December 31. Loan payments on your reamortized loan will resume as of January 2021.

DISTRIBUTIONS

Yes. The CARES Act allows Qualified Individuals in workplace retirement plans to request distributions up to $100,000. These distributions would not be subject to the 10% early withdrawal penalty. Distributions processed prior to March 27, 2020 may also qualify as a COVID-Related Distribution. We recommend you seek guidance from your tax advisor when preparing your 2020 personal tax returns.

Yes. Distributions under the CARES Act are subject to regular income taxes. The COVID-Related Distribution Form provides information about tax withholding. It is important to note that certain states require state withholding from all plan distributions, including COVID-related distributions. In addition, when preparing your personal tax return, you may elect to pay distribution taxes over a three-year period.

No, you are not required to pay back the proceeds of the withdrawal. However, in the event that you do repay the amount withdrawn to an eligible retirement plan within three years, you will receive a credit for any taxes paid on the distribution. Please contact your accountant or tax advisor for additional guidance on the taxation of the CARES Act withdrawals.

All contribution types, except money purchase funds, are available for distribution from the plan regardless of your age or years of service.

You may access the Coronavirus-Related Distribution Form by logging into your account at u.bpas.com, and accessing the Administrative Forms section in the Resource Center.

REQUIRED MINIMUM DISTRIBUTIONS

Yes. RMDs are suspended for defined contribution plans for 2020 to allow retirement accounts to recover from stock market losses. You don’t need to do anything to suspend your RMD. BPAS will automatically suspend any future RMD payments for 2020 on your behalf.

Some RMDs were processed before the CARES Act. Typically, RMDs are not eligible for rollover. However, because RMDs were suspended under the CARES Act, the money you received would now be considered a voluntary distribution making it eligible for a rollover. If you received an RMD for 2020, you may roll it over to an eligible IRA or workplace savings plan, as long as the deposit occurs within 60 days of the original distribution date. Please note that the IRS may provide additional guidance or clarification on the availability of rollovers. You should consult with your tax advisor regarding any distributions received from your IRA or retirement plan this year.