6 Things to Know about Retirement and the Coronavirus Relief Bill

6 Things to Know about Retirement and the Coronavirus Relief Bill

April 01, 2020
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Now that the $2 trillion coronavirus relief bill has passed. There are huge implications within this bill that we want to make sure our clients and community understand, especially when it comes to retirement accounts. We’ve outlined the major changes below:
1.Take up to $100,000 without the 10% penalty for early withdrawal for affected persons.
Normally an early withdrawal (before the age of 59 ½) from a retirement account incurs a 10% penalty in addition to taxes. With the relief bill, affected persons will be able to take up to $100,000 out of their accounts early without paying the 10% penalty. Affected persons are defined as account owners (or their spouses or dependents) diagnosed with COVID-19 or persons who have lost income due to layoffs, business closures, quarantine, reduction in hours, or an inability to work due to lack of child care.
2.Tax on withdrawal needs to be paid within three years.
Funds withdrawn from a retirement account are taxed at the account owner’s ordinary income tax rate; however, with the relief bill, those taxes can be spread out over three years, instead of one year.
3.Suspension of the minimum required distributions.
For retirees age 70 ½ (or 72) and older, the bill removes the required minimum distributions (RMD) withdrawal for all tax-deferred 401(k) and individual retirement accounts for the year 2020.
4.Money can be put back into 401k or IRA within three years.
If you need to take an early withdrawal from your 401k or IRA, the money can be put within three years and, and skip the tax payments, even if the amount they want to redeposit exceeds the annual contribution limit, which is currently $6,000 for an IRA (or $7,000 for those 50 or older) and $19,500 for a 401(k) (or $26,000 for those 50 or older.)
5.New 401k loans limits have increased to $100,000 or 100% of account.
This is twice as high as the old amounts allowed. Loans still need to be paid back through after-tax payroll deductions; therefore, participants need to understand the rules if they go into default on those payments.
 
6.Participants with 401k loans can delay any repayment due in 2020 for a year.
This one is very straightforward: If a participant has a current loan, payments can be deferred until next year.
Please contact the 360 Financial team if you have questions about your situation.
Our team is here to help you during these confusing times.
Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.