We want to make you aware of the options available to you as a result of the Coronavirus Aid, Relief and Economic Security (CARES) Act.
The act was signed into law by the president on March 27, 2020 and provides options for you to consider as you navigate financial decisions in the coming months. As always, we recommend reaching out to your personal financial adviser or a TIAA financial consultant to review your current situation–along with short- and long-term financial goals–before making any decisions.
MICA has chosen to adopt the following CARES Act provisions:
- Penalties and mandatory withholding are waived for qualified distributions from retirement plan accounts. Eligibility requirements apply.
- Retirement plan loan limits have been increased temporarily. Eligibility requirements apply.
- Ability to temporarily suspend retirement plan loan repayments. Eligibility requirements apply.
- Optional suspension of required minimum distributions (RMDs) for 2020.
Who is eligible?
You are considered eligible to take COVID-19 related distributions/loans from your retirement plan if any of the below conditions are met:
You have been diagnosed with COVID-19 by a test approved from the Centers for Disease Control and Prevention (CDC).
You have a spouse or dependent who has been diagnosed with COVID-19.
You suffer financial consequences as a result of quarantine, employment furlough, layoffs, reduced work hours or cannot work due to lack of child care as a result of coronavirus.
You experience a financial loss to an individually owned or operated business that is caused by a closing or reduction of hours due to coronavirus.
Other factors as determined by the Secretary of the Treasury or his delegate.
How can the act help if you are eligible?
- Penalties and withholding are waived for qualified distributions from retirement plan accounts.
Provided the above eligibility criteria are met, the CARES Act waives the 10% early withdrawal penalty and eliminates the 20% federal withholding for coronavirus-related distributions of up to $100,000 across qualified retirement plans through December 31, 2020. While the 20% withholding will not be taken from distributions, you will have the option to add withholding if you want.
Distributions will be subject to both federal and state taxation, and you will have the option to pay taxes due over a three-year period. We suggest you consult with your personal tax advisor.
The act also allows you to reinvest withdrawn funds within three years regardless of that year’s contribution limit, making it easier to replace the amount of your distribution in your retirement account.
Retirement plan loan limits are increased.
Through September 23, 2020 and provided the above eligibility criteria are met, the CARES Act increases the maximum retirement plan loan limits from $50,000 or 50% of vested account balances to $100,000 or 100% of the vested account balance.
This is also dependent on MICA’s loan policy, the type of loan, the number of loans allowed and limits offered within our plan.
If you choose to take a loan, you will be asked to self-certify that you meet the requirements for a coronavirus-related loan. The loan approval process will remain the same as it does for non-coronavirus-related loans.
Through December 31, 2020 and provided the above eligibility criteria are met, if you have an existing retirement plan loan, you may be able to defer payments for one year and extend the term of your loan by one year.
Suspension of required minimum distributions (RMDs).
To help provide relief for those required to take RMDs, the CARES Act allows you to cancel your 2020 RMD payments and restart them in 2021.
If you already have an RMD payment scheduled for this year, you have the flexibility to cancel it, and TIAA will restart it automatically in 2021.
If you have already started receiving your RMD this year, you have the option to repay it as a rollover. If checks have already been sent, you have 60 days to roll over those funds into a plan that accepts rollovers or into an IRA. In past disaster scenarios, the IRS has extended that rollover period. TIAA will monitor regulatory activity and notify clients if an extension is granted in this context.
If you have not set up your RMD this year, based on the CARES Act, TIAA cannot set up new RMD payments. If you still need the money, you can take a withdrawal.
If you meet the eligibility criteria detailed above, would like to speak to a financial consultant or would like to request loans or distributions, you can do so by logging in to your online account at TIAA.org or calling TIAA at 855-400-4294. You can also visit TIAA.org for more information on the provisions of the CARES Act and other changes to consider. We recommend reviewing all of your options prior to making a decision.
Please contact our office via email if you have any questions. Thank you.