The CARES Act 2.0: What Employers Need to Know
As American workers and businesses continue to grapple with the health and economic ramifications of the COVID-19 global health crisis, the Consolidated Appropriations Act of 2021 (otherwise known as CARES Act 2.0) was signed into law on December 27, 2020.
Retirement Plan Provisions
While the Act contains a wide range of stimulus provisions, there are three provisions of note that impact retirement plans in 2021:
- The Act allows qualifying employers and retirement plan sponsors that laid off or furloughed employees due to the pandemic’s economic effects to avoid partial plan terminations:
- Companies have until March 31, 2021 to rehire laid-off workers.
- The number of active participants covered by the plan on March 31, 2021 needs to be at least 80% of the number covered by the plan on March 13, 2020.
- The Act allows participants to take a coronavirus related distribution (CRD) from money purchase pension plans. This new provision, effective this year, is retroactive to the passage of the CARES Act that allowed CRDs from other types of plans through year-end 2020.
- The Consolidated Appropriations Act of 2021 also allows for distributions from retirement plans for participants affected by disasters (as declared by the President) other than the COVID-19 pandemic.
- Participants may take up to a total of $100,000 from their retirement plan accounts without tax penalties during the 180 days since the Act passed (December 27, 2020).
- Income tax on distributions may be spread over three years.
- Participants may also repay distributions taken into plans that allow rollovers within three years.
We Welcome Your Questions
If you have questions regarding any of the retirement provisions of the Consolidated Appropriations Act of 2021 (CARES Act 2.0), your trusted ABG Southwest representative is available to help. Contact us. The situation continues to be fluid as we move forward in 2021, and we will keep you updated on any new developments.