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March 30, 2020
Please find below a summary of the changes to Retirement
Accounts, Health Plans and other Employee Benefit under the Coronavirus Aid,
Relief, and Economic Security Act (CARES Act), signed by President Trump on
March 27.
Section 2202 - Eligible retirement plan emergency withdrawals:
Plans may permit
individuals financially impacted by COVID-19 to withdraw up to $100,000 in
emergency funds from their eligible retirement plan from January 1 through
December 31. This is determined on a controlled group basis.
An individual is
considered to be financially impacted by COVID-19 if:
- the individual
is diagnosed with COVID-19;
- their spouse, or
dependent is diagnosed with COVID-19; or
- the individual
experiences adverse financial consequences as a result of being
quarantined, furloughed, laid off or having work hours reduced due to
COVID-19, or is unable to work due to lack of child care due to
COVID-19, or a business owned or operated by the individual closes or
reduces hours due to COVID-19.
An "eligible
retirement plan" is a qualified plan, an individual retirement plan, a
403(b) plan, a 403(a) annuity plan, or an eligible 457 plan. An
"individual retirement plan" is an individual retirement account or
an individual retirement annuity, more commonly known as an IRA.
Section 2202 - 10%
excess tax on certain early distributions not imposed:
A 10% excise tax is
imposed on certain early distributions from eligible retirement plans. Tax does
not apply to COVID-19 related distribution (CRD) up to $100,000 (determined
on a control group basis).
CRD's are defined as:
- Distribution(s)
made from eligible retirement plan on or after January 1, 2020 and
before December 31, 2020
- During 2020
- To an individual
- Diagnosed with
COVID-19
- Spouse or
dependent diagnosed with COVID-19
- Furloughed, laid
off, or unable to work because of COVID-19.
Recipient can avoid any
income tax by repaying amount of CRD as a rollover within three years of
distribution, To the extent not repaid, taxable ratably over three years.
Section 2202 -
Emergency Plan Loans:
Qualified retirement plans
may permit individuals financially impacted by COVID-19 (using the same
definition as for plan emergency withdrawals) to take loans of up to $100,000
from their retirement accounts (instead of the usual limit of $50,000). Loan
repayments, which can be spread out over five years, may be delayed up to one
year. Loans can be taken up to 100 percent of the present value (increased
from 50 percent) of the individual's vested account balance or benefit.
Section 2202 -
Qualified Plan Amendments:
Plans may operate to
permit emergency withdrawals, emergency loans and waive required minimum
distributions, without a formal amendment, so long as the plan is amended by
the end of the 2022 plan year.
Section 2203 -
Required Minimum Distributions:
Required minimum
distribution requirements will not apply for calendar year 2020. To certain
defined plans 403(a) 403(b),457(b) and IRAs.
Section 3601 -
Limitation on Paid Leave:
An employer will not be
required to pay more than $200 per day and $10,000 in the aggregate for each
employee under this section.
Section 3602 -
Emergency Paid Sick Leave Limitation:
An employer shall not be
required to pay more than $511 per day and $5,110 in the aggregate for sick
leave or more than $200 per day and $2,000 in the aggregate to care for a
quarantined individual or child for each employee under this section.
Section 3605 - Paid
Leave for Rehired Employees:
An employee who was laid
off by an employer March 1, 2020, or later will be allowed to have access to
paid family and medical leave in certain instances if they are rehired by the
employer.
Employee would have had to
work for the employer at least 30 days prior to being laid off.
Section 3606 -
Advance Refunding of Credits:
An employer or a self-employed
individual may offset on a dollar for dollar basis and on a payroll by
payroll basis the amount the employer or the self-employed individual has
paid to its employees for Emergency Paid Sick Leave and paid FMLA against the
employer's contribution for social security. If the amount of benefits paid
exceeds the amount of the employer's social security contribution, the IRS
will establish a procedure under which the employer can apply for an
expedited refund of those amounts.
Section 3607 -
Expansion of DOL Authority to Postpone Certain Deadlines:
The Department of Labor
shall have the ability to postpone certain ERISA filing deadlines for a
period of up to one year in the case of a public health emergency.
Section 3608 -
Pension Payments:
Employers maintaining
single-employer pension plans can delay making minimum required contributions
due this year until January 2021. Contributions would be due with interest,
accrued at a plan's effective rate.
Section 3701 -
Health Savings Accounts for Telehealth Services:
A high-deductible health
plan (HDHP) with a health savings account (HSA) will be allowed to cover
telehealth services prior to an individual reaching the deductible, for plan
years beginning on or before December 31, 2021, This allows HDHP participants
to receive first dollar coverage for telehealth and other remote care
services without disqualifying them from being eligible to contribute to a
health savings account (HSA).
Section 3702 - Tax-free
Reimbursement of Feminine Hygiene Products without Prescription:
Patients can use funds in
HSAs and Flexible Spending Accounts for the purchase of over-the-counter
menstrual care products. These products will now be included under the term
"qualified medical expenses." without a prescription from a
physician.
Section 4004 -
Executive Compensation Limitations:
If a company accepts
certain emergency direct lending relief under CARES, the company must agree
to certain limitations on the compensation (including salary, bonuses,
equity, and other financial benefits) paid to its officers and employees that
remain in effect until one year after the loan or loan guarantee ceases.
These limitations are as
follows:
No officer or employee
whose total compensation in 2019 exceeded $425,000 (excluding certain
collectively bargained employees:
*
May receive compensation during any 12-month period greater than the amount
received in 2019 or
*
May receive severance pay or benefits upon termination which exceed two times
the maximum total compensation received in 2019.
Additionally, no officer
or employee whose total compensation in 2019 exceeded $3,000,000 may receive
compensation during any 12-month period greater than $3,000,000 plus 50
percent of the amount greater than $3,000,000 received in 2019.
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