Earlier this month the Internal Revenue Service released new clarification on provisions in the Coronavirus Aid, Relief, and Economic Security Act (or CARES Act) aimed at those with 401(k) who need financial assistance.
The CARES Act gives qualified participants access to their retirement funds, increases maximum 401(k) loan limits, and allows for the deferment of 401(k) loan repayments.
- COVID-19 Employer Resources: CARES Act
“The Act allows 401k participants to access funds in their retirement account to cover lost income during the COVID-19 crisis,” says Cris Borden. Borden is the 401(k) Consultant for the SLAVIC 401(k) plans provided through simplicityHR by ALTRES and urges plan participants to stay the course if possible.
“We encourage all participants to analyze their financial situation carefully prior to making a decision to tap into their retirement funds. Accessing and spending retirement funds today could have a major impact on the ability to save for retirement.”
Individuals are now allowed to pull money out of their 401(k) with no early withdrawal penalty. Under previous rules, early withdrawals from 401(k) accounts were only allowed during qualified events like job leave, retirement or specific hardships. Withdrawals, however, may still be taxed.
In addition, the loan limit for people who want to borrow from their 401(k) has been doubled. Individuals may borrow 100% of their funds, up to 100K, where previously it was 50%, up to $50K
Qualified participants with plans through SLAVIC and simplicityHR were notified of these changes. Employers who administer their own plans should be sure to communicate the changes to qualified participants.
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This material is provided for informational purposes only. It is not intended to constitute legal advice, and reader should consult with their advisor or counsel before taking any actions based on the information contained within this material.