How the CARES Act Takes Care of an Individual's Savings and Retirement Benefits

Abstract

The CARES Act forgives federal student loan payments with due dates between March 27, 2020 and September 30, 2020 and suspends the minimum required distribution rules for distributions otherwise due during the 2020 calendar year. The CARES Act also provides cash flow relief for qualified individuals with savings and retirement benefits by enhancing provisions for direct loans and indirect loans (repayable distributions) of such benefits.

Guidance is needed to address at least six major issues. Who are qualified individuals, and how may they may be determined? What notices are required pertaining to the enhanced loan provisions, and to the enhanced distribution provisions? What is the DOL position with respect to fiduciary responsibility requirements pertaining to the enhanced direct and to the indirect loan provisions? Must plans defer loan payment due dates by qualified individuals for due dates between March 27 and December 31, 2020 in the same manner as IRS Notice 2020-23 requires plans to do so for all participants and beneficiaries for due dates between April 1 and July 14, 2020 How do plans determine the new amortization schedule for those deferring such payments? Must plan administrators give qualified individuals the right to avoid withholding on the enhanced distributions that the Act calls coronavirus-related distributions in the same manner that plan administrators must do so for all participants and beneficiaries on the distributions that would be 2020 required minimum distributions, absent the CARES Act? May qualified individuals repay all or only some coronavirus-related distributions within three years to an eligible retirement plan?

The longer this guidance is delayed, particularly with respect to the definition and the determination of a qualified individual, the longer will the relief to individuals needing such relief be delayed and the longer will those individuals be unaware of the available relief.

Keywords: COVID-19, coronavirus, financial relief, saving plans, pension plans, retirement plans, IRAs, student loans, ERISA, Internal Revenue Code, tax, loan relief, distribution relief, penalties, fiduciary responsibility, required minimum distributions

JEL Classification: I18, J26, J32, K34, K39