IRS Q&As Provide Some Guidance on IRA, Retirement Plan COVID-19-Related Relief

The IRS has issued guidance in question-and-answer (Q&A) format on the special IRA and retirement plan relief granted in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, legislation signed into law on March 27, 2020. This relief is intended to aid those affected by the coronavirus (COVID-19) pandemic that has impacted the health and economic welfare—or both—of many Americans.

Special IRA and retirement plan distribution, taxation, and rollover options, as well as retirement plan loan access, are provided by the CARES Act, which in most respects resembles legislation to aid victims of past hurricane and major disaster events. The IRS Q&As address the following issues.

  • The CARES Act expanded distribution, favorable tax treatment, and portability options for coronavirus-related distributions (CRDs) from IRAs and employer-sponsored retirement plans
  • The IRS’ intention to issue additional guidance based on previous IRA and employer-plan-related relief granted under the Katrina Emergency Tax Relief Act (KETRA) of 2005
  • Who is a qualified individual for purposes of CARES Act relief
  • What is considered an eligible coronavirus-related distribution (CRD) from an IRA or employer-sponsored retirement plan
  • Exemption of CRDs from the 10 percent early distribution penalty tax
  • Special taxation options for CRDs
  • Eligibility to repay CRDs taken from an IRA or employer-sponsored retirement plan
  • Increased retirement plan loan amount and delayed loan repayment options
  • Enhanced access to employer-sponsored retirement plan assets through CRDs, and the ability of plan administrators to rely on plan participants’ representations of eligibility for CRDs
  • The option for employer-sponsored retirement plans to adopt—or choose not to adopt—the enhanced distribution and loan provisions of the CARES Act
  • Retirement plan acceptance of CRD repayments
  • Taxpayer reporting of CRDs
  • Retirement plan and IRA reporting of CRDs

It is hoped that the additional guidance referred to in this Q&A posting will be forthcoming soon, and will provide more clarity in administering the provisions of the CARES Act.