Retirement Plan Relief Ideas Before the Lawmakers
With uncertainly of the last few weeks and its impact on markets, we want to share some of the retirement account-related proposals recently presented to the law makers as they contemplate the next economic stimulus bill. The ideas in many ways follow the 2008 recovery legislation playbook and include the following:
- Waiver of the 10% premature distribution penalty for those who reside in the declared health emergency area and experience economic loss
- Doubling the retirement plan loan limit to the lesser of $100,000 or 100% of a vested account balance
- Allowing individuals up to three years to repay distributions taken out of retirement accounts
- Permitting individuals whose retirement plan loan goes into default up to three years to pay income tax associated with the default
- Delaying a loan repayment due date for up to a year
- Issuing a temporary waiver for 2020 Required Minimum Distributions
- Providing an automatic 60-day extension of tax-filing deadlines
- Extending deadlines for correction of certain non-discrimination tests
- Reasonable relief from participant notices required under Title I of ERISA
- Providing a wage credit for employee retention for employers impacted by the COVID-19 outbreak
While most of the proposals outlined above require action of the legislators, some – such as deadline extension and notice relief – fall within the scope of regulatory authority given to the Department of Treasury, the Internal Revenue Service, and Department of Labor. The American Retirement Association is actively working with the Agencies and law makers to advocate for a retirement account relief package to help plan sponsors and participants.
We are continuing to actively monitor this developing situation and send further updates as they become available.
For discussion purposes only and in no way represents legal or tax advice. For advice regarding your specific circumstances, the services of an appropriate legal or tax advisor should be sought.