Important Reminder About Deadline for CARES Act Assistance
This article offers important details concerning the provisions of the legislation known as the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The CARES Act contained several retirement plan-related provisions to assist employees who have been impacted by the COVID-19 pandemic. These provisions included:
- No penalty for withdrawals made as a result of hardship caused by the pandemic;
- Access to higher limits for plan loans; and
- Deferment of existing loan payments for employees who had a current plan loan.
These provisions are set to expire on December 31, 2020. However, that doesn’t mean that assistance is not available to you if you have been financially impacted by the COVID-19 pandemic. Following are options available to you:
- If you are age 59½ or older, you are eligible to take an in-service distribution or a loan from your retirement plan at any time.
- If you are under the age of 59½, you can take a loan or a hardship withdrawal from your plan.
The Einstein 403b Retirement plan complies with the safe harbor rules regarding hardship withdrawals, which includes claiming a Federal Emergency Management Agency (FEMA)-declared disaster as an allowable reason. (The COVID-19 pandemic is considered a FEMA-declared disaster.). This means that you may qualify for a hardship withdrawal from your retirement plan if you have been impacted by COVID-19. To learn if you qualify, please contact Fidelity at 855.498.7283.
Where Your Action May Be Needed
If you took a CARES Act distribution or loan, or deferred your loan repayments in 2020, here’s what to expect in 2021.
If you received a CARES Act Withdrawal
If you received a CARES Act withdrawal during 2020 and were under the age of 59 ½, the additional tax on early distributions does not apply to your withdrawal. Any taxes due on CARES Act distributions may be paid ratable over a three-year period. However, you also had the option of electing to withhold taxes from your distribution when you received it.
You have the ability to repay all or part of your CARES Act distribution to your retirement plan account over the next three years (presumably filing for a tax deduction on the taxes you will have paid as a result of the distribution). Any repayments you make are not subject to the annual retirement plan contribution limits.
For further information concerning your options, please call Fidelity or your tax advisor.
If you received a CARES Act Loan
If you elected to receive a CARES Act loan, which provided you with access to higher dollar limits for a plan loan, your loan payments will begin in January 2021 (that’s next month). Please watch for information from Fidelity on how to set up your loan payments using the Automated Clearing House, or ACH (a network that coordinates electronic payments or automated money transfers directly from your bank account).
If you elected to Defer Your Loan Repayments on an Outstanding Plan Loan
If you had an outstanding loan from your retirement plan and elected to defer your loan repayments through December 31, 2020, your loan will be reamortized in January 2021 and the postponed loan repayments will begin again in January (next month). Your loan repayments will increase slightly based on the interest that has accrued during the period of your postponement.
Fidelity will contact you directly about your new loan repayment amount and what you need to do to restart your loan repayments using ACH. Since your loan repayment will have increased, you must take action to set up new loan repayments.
Please note: All loan repayments must be made via ACH from your bank account.
Please also be aware: If you do not set up loan repayments, your loan will be in default and the outstanding balance of your loan will be taxable to you. In addition, you will not be able to request another loan until the defaulted loan is paid back to your retirement plan.
For assistance or answers to questions you may have, please contact Marsha Alexis, Einstein’s dedicated Fidelity Retirement Planner at email@example.com, or call Fidelity at 855.498.7283.
Posted on: Tuesday, December 29, 2020