CARES Act Compliance Reminders For Qualified Plans

From Jan. 1 through Dec. 30, a plan is permitted, but not required, to allow qualified individuals to treat a 401(k) plan distribution as a coronavirus-related distribution, or CRD. These distributions (up to $100,000) are not being subject to the 10% early withdrawal tax for distributions prior to age 59.5 and are taxed pro rata over a three-year period. An individual's designation as a qualified individual under the CARES Act only needs to be certified by the plan participant.

The employer/plan sponsor has no duty to inquire whether an individual has in fact satisfied the conditions. If an Employer wants to revoke the ability for a plan distribution during the 2020 year, they should adopt a formal plan amendment with corporate resolutions and distribute a summary of material modification as soon as possible thereafter. Remember to see the DOL's new electronic disclosure rules. Contact me and I will send you our memo on it.