COVID-19 Relief: A Benefit Plans Overview of the CARES Act

On March 27, 2020, Congress passed and the President signed the Coronavirus Aid, Relief, and Economic Security Act “CARES Act” of 2020. The Act is intended to provide a broad economic stimulus and coronavirus (COVID-19) relief for Americans. The law impacts both retirement and health & welfare plans. Below is a high-level recap of provisions impacting benefit plans. Early next week, we will be providing our clients with additional detailed information.



Most of the following provisions are discretionary for the employers.

“Coronavirus-related distributions” (CRDs)

  • Applies to “eligible retirement plans” under Code Section 402(c)(8)(b)
  • CRDs are allowed for individuals who are diagnosed with the virus (or their spouse/dependents) or who have experienced adverse financial consequences due to being quarantined, being furloughed or laid off or having work hours reduced due to the virus, being unable to work due to lack of child care due to the virus, closing or reducing hours of a business owned or operated by the individual due to the virus, or other factors as determined by the Treasury.
    • Employers can rely on the employee’s certification that they satisfy the conditions above
  • Maximum amount that may qualify as a CRD is $100,000 in the aggregate for all plans of the employer
  • Taxation of CRD can be spread over 3 years
  • CRD’s are exempt from 10% pre-59 1/2 penalty (state penalties may apply unless a similar exemption is passed by the state)
  • CRD’s are not an eligible rollover distribution, so the plan is not required to withhold 20% when the money leaves the plan (10% withholding may apply)
  • CRD’s can be repaid back to the plan (or any eligible retirement plan) within 3 years of distribution

Participant loan changes

  • Applies to “qualified employer plans” under Code Section 72(p)(4)
  • Active participants who meet the conditions above for coronavirus-related distributions may be eligible to take larger loans if the loan is taken between the date of enactment of the bill and 180 days (approximately end of September).
  • Maximum amount of loans may not exceed the lesser of:
    • 100% of the vested account, or
    • $100,000
  • Any loan repayments due during the date of enactment through December 31, 2020 may be delayed by one year

Waiver of Required Minimum Distributions for 2020 for Defined Contribution Plans

  • Required minimum distributions (RMDs) are waived for 2020. This includes 2019 required minimum distributions for participants who attained age 70 ½ in 2019 and have their first RMD due April 1, 2020, as well as 2020 RMDs.
  • Applies to all defined contribution plans including 401(k), 403(b), governmental 457(b) plans, profit sharing, money purchase and stock bonus plans
  • Does not apply to defined benefit plans

Defined Benefit Plan Funding Waiver

  • Minimum required contributions due during 2020 to single-employer defined benefit plans may be delayed until January 1, 2021.
  • A plans’ funded status for determining the application of the IRC Section 436 restrictions for the 2020 plan year will be based on the plan’s funded status for the 2019 plan year.


Health Flexible Savings Accounts (HFSA) and Health Savings Accounts (HSA) – Expands Eligible Expenses

  • Repeals the prescription requirement for over-the-counter (OTC) medicines and drugs
  • Allows for “menstrual care products” to be reimbursed
  • Effective for expenses incurred after December 31, 2019

Health Savings Accounts (HSA) – Expanded Telehealth Coverage

  • Telehealth and other remote care services can be covered before the deductible is met in a high deductible health plan (HDHP) without jeopardizing the HSA
  • Permitted for plan years beginning on or before December 31, 2021.

TRI-AD is working diligently to fully analyze the new law and incorporate the changes into our operations processes. The IRS may take several weeks/months to issue additional guidance but employers will want to implement some of these changes very quickly. Please keep an eye out for additional information coming soon.

Not Legal Tax Advice: This newsletter is for general education purposes only. Nothing in this newsletter should be construed as tax or legal advice. TRI-AD may not be considered your legal counsel or tax advisor. If you have questions about how anything discussed in this newsletter pertains to your personal or your organization’s situation, we encourage you to discuss the issue with your attorney and/or tax advisor. TRI-AD’s communications are not privileged under attorney-client privilege.