The COVID-19 pandemic poses a number of challenges for employee benefit plans and their fiduciaries.  The associated demand for medical care and financial strain on employees have led to the enactment of laws creating additional obligations for these plans, as well as making special plan features available to assist employers and employees in dealing with the crisis.  This newsletter provides an overview of important employee benefits considerations and legal developments.


The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), enacted on March 27, 2020, was the third piece of legislation passed in an attempt to address the economic impact of COVID-19.  The CARES Act includes a number of provisions affecting qualified retirement plans and IRAs, as well as group health plans.  The provisions likely to be of the most interest to employers sponsoring qualified retirement plans and group health plans are outlined in this newsletter.


The Internal Revenue Service (“IRS”) recently released a set of frequently asked questions (available at the IRS website here) that provides additional clarity on a number of important CARES Act retirement plan provisions.

“Coronavirus-Related Distributions”

Under the CARES Act, a “qualified individual” can withdraw up to $100,000 from that individual’s 401(k) or another qualified plan or IRA in a “coronavirus-related distribution” (“CRD”) that qualifies for favorable tax and rollover treatment.  In the case of 401(k), 403(b) and 457(b) plans, the CARES Act waives the usual statutory restrictions on in-service distributions, although any spousal consent rules relevant to a particular plan still apply.  Distributions from defined benefit plans and money purchase pension plans can be made only if otherwise legally permissible (e.g., to someone who has terminated employment or attained age 59½) and only if the usual spousal consent rules are satisfied (taking into account the IRS’ modified notarization requirements), but can qualify for the special tax and rollover rules.[1]  Plans are not required to allow CRDs, but someone who takes a distribution or withdrawal can claim the CRD tax benefits if the individual and the distribution meet all the requirements, even if the plan making the payment has not offered any special distribution rights.  For example, a terminated employee who is a “qualified individual” might take a distribution under a 401(k) plan’s normal distribution rules, and claim the CRD benefits on his or her tax return.  The IRS has said that plans should report CRDs on Form 1099-R, and that it will provide additional instructions for plans’ tax reporting in the future.  The IRS will make Form 8915-E available for individuals to report CRDs and subsequent CRD repayments.

Under the CARES Act, a “qualified individual” is defined as:

  • An employee who has been diagnosed with SARS-coV-2 or coronavirus disease 2019 (collectively, “COVID-19”) by a test approved by the CDC;
  • An employee whose spouse or dependent has been diagnosed in such a manner with COVID-19; or
  • An employee who experiences “adverse financial consequences” as a result of being quarantined, furloughed, laid off, having hours reduced, being unable to work due to lack of child care due to the coronavirus, or having to close or reduce the hours of a business the individual owns due to the coronavirus, or such other factors as determined by the Secretary of the Treasury or his delegate. 

This list of qualifications omits a number of common situations that have resulted in adverse financial consequences in connection with the pandemic.  For example, it does not cover individuals who are affected by the loss of a household member’s income, nor does it cover reductions in pay without reduction in hours.  The IRS said in its FAQs that it is currently reviewing requests to expand the list of factors.

Plan administrators may rely on the employee’s certification that the employee meets one of the above conditions in determining whether the employee is a qualified individual, although the IRS’ FAQ says this reliance is permissible only in the absence of actual knowledge to the contrary.  Certifications should be high-level and minimize any need to disclose medical information regarding the employee or the employee’s spouse or dependent.  The employee can simply be asked to certify that one of the above conditions is true, and should not be asked to specify which one applies or to provide other details.  We recommend that plan fiduciaries confirm that the scope of self-certification being requested by their recordkeepers is sufficiently high-level.

The $100,000 cap on CRDs applies in the aggregate to all distributions to the qualified individual, but an employer is not required to enforce the limit with respect to any plans not maintained by the employer or a member of the employer’s controlled group.  For example, if an employer makes a distribution of $100,000 from the employer’s 401(k) plan, the employer has not violated any rules if the qualified individual also takes payment from that individual’s personal IRA or a plan sponsored by an unrelated employer.  Alternatively, for example, if an employer makes a distribution of $110,000 from the employer’s 401(k) plan, then that plan would have a compliance failure.  We recommend that plan fiduciaries confirm with their recordkeepers that this limit is being tracked across all plans within the employer’s controlled group.  Of course, the individual can only claim the CRD tax benefits for up to $100,000, and may face additional adverse tax consequences if he/she obtained an otherwise-impermissible distribution in excess of the CRD limits.

A CRD is exempt from the 10% early withdrawal penalty typically incurred for withdrawals before age 59½.  Ordinary income tax does apply (subject, of course, to any special tax treatment available for after-tax contributions, Roth contributions and so forth), but the qualified individual can spread the taxes over three years if he or she so desires, paying 1/3 for 2020, 1/3 for 2021 and 1/3 for 2022.

In addition, at any time during the three-year period beginning on the day after the date the CRD was received, the qualified individual may make one or more contributions in an aggregate amount not to exceed the amount of the distribution to an eligible retirement plan (i.e., a qualified plan, 403(b) plan, governmental 457(b) plan or IRA).  These contributions will be treated as rollover contributions (or direct trustee-to-trustee transfers, if an IRA is the recipient of the contribution) for tax purposes.[2]  An individual who does this would then file amended tax returns to claim any refunds necessary due to inclusion of the repaid distribution in prior years’ taxable income.   

Although CRDs are eligible for this three-year rollover treatment, they are not subject to the usual rules for payment of eligible rollover distributions at the time payment is made.  This means that individuals do not need to be offered direct rollover rights and notices, and that the usual requirement that 20% of the payment be withheld for taxes does not apply.

The CRD rules apply to qualifying distributions made on or after January 1, 2020, and before December 31, 2020 (i.e., no later than December 30, 2020).  Plan amendments will be due by the end of the 2022 plan year (with governmental plans entitled to a later deadline).

Participant Loans

Normally, the Internal Revenue Code limits loans to plan participants to the lesser of $50,000 (reduced by the excess of the highest outstanding loan balance during the one-year period ending on the day before the date of the loan over the outstanding loan balance on the date of the loan) or 50% of the participant’s vested account balance as a loan.  Under the CARES Act, for loans issued from March 27, 2020 to September 22, 2020, this amount is doubled for qualified individuals (as defined in the previous section for purposes of CRDs) to the lesser of (a) $100,000 (reduced under the usual rule for prior outstanding loan balance amounts) or (b) 100% of the participant’s vested account.  

In Employee Benefits Security Administration Disaster Relief Notice 2020-01, the Department of Labor (“DOL”) confirmed that it would not consider a loan issued in accordance with the CARES Act to be in violation of the DOL’s regulations regarding loan limits, even though the CARES Act did not specifically address those rules.  Accordingly, plan sponsors can, if they wish to do so, expand participant loan access as permitted by the CARES Act without running afoul of the DOL regulations.

Additionally, if a qualified individual has an outstanding loan on or after March 27, 2020, any due date that falls on or after March 27, 2020 and no later than December 31, 2020 can be delayed by one (1) year.[3] The loan’s repayment schedule will be appropriately adjusted to reflect the delay in payment and any interest accrued during the delay, and the end of the loan’s term will be correspondingly extended.  Since repayment suspension is permitted only for payments due through December, loan repayments will need to resume in January 2021.

As was the case for CRDs, these loan changes are optional.  Employers do not have to allow employees this expanded access, nor do they need to allow loan repayment suspensions.  And as in the case of CRDs, plan amendments reflecting these changes will be due by the end of the 2022 plan year (with governmental plans entitled to a later deadline).

Required Minimum Distributions

Normally, qualified plans and IRAs must make “required minimum distributions” to participants and IRA owners who have attained a certain age (currently age 72, or age 70½ for individuals who had attained age 70½ prior to 2020),[4] as well as to beneficiaries of deceased participants.  That requirement will not apply to IRAs and defined contribution plans for 2020, although defined benefit plans must make payment as usual.  In addition, individuals who had not yet taken their 2019 distributions from an IRA or defined contribution plan by the end of 2019 and who were due to receive those payments by April 1, 2020 do not need to take that distribution.  Finally, beneficiaries who normally would have been required to complete payment from an IRA or defined contribution plan by the end of the fifth year after the participant or IRA owner’s death can calculate that five-year deadline by disregarding 2020.[5]

Presumably, employers will want employees and beneficiaries to remain free to take payment if they prefer to do so.  Employers will need to work with their recordkeepers to decide whether to process payment as usual, whether to process payment as usual unless the participant or beneficiary requests that payment not be made, or whether to hold off on making payment unless requested to do so.   In the context of the similar RMD waiver implemented by the Worker, Retiree and Employer Recovery Act of 2008 (“WRERA”), employers were given flexibility, and hopefully the IRS will issue similar guidance this time.  However, no guidance has been issued to date.

Distributions that would otherwise be required minimum distributions need not be treated by the paying plan as eligible for rollover, which means that the plan does not need to abide by the notice, direct rollover and tax withholding rules applicable to rollover-eligible payments.  Again, however, the IRS may give employers flexibility to choose to offer rollover opportunities, as was done for WRERA.  The IRS’ recent CARES Act guidance does not provide any details, but future guidance hopefully will address the issue.

The CARES Act does not specify what options individuals who had already taken payment in 2020 might have.  However, since these distributions were not, in fact, RMDs, participants and spousal beneficiaries should be able to roll them back into an eligible retirement plan.  In this regard, Notice 2020-23’s extension to July 15, 2020 of 60-day rollover deadlines that would otherwise fall on or after April 1, 2020 and before July 15, 2020 may be helpful.[6]  The IRS may also issue relief for scheduled installment payments in excess of the RMD amount, as it did in connection with WRERA, but the nature and extent of rollover rights (if any) for those payments is not yet known.

Amendments reflecting the RMD changes will be due by the end of the 2022 plan year (with governmental plans entitled to a later deadline).

Pension Plan Funding Relief

Minimum required contributions for single-employer defined benefit plans that would normally have been due in 2020 will not be due until January 1, 2021.  The delayed contributions will incur interest between the original due date and the date the contributions are made.   An employer can also opt to calculate its plan’s funded status for purposes of Section 436 distribution restrictions based on the plan’s 2019 valuation.

The CARES Act also expands the definition of “cooperative and small employer charity” pension plans to include charitable employers whose primary exempt purpose is providing services with respect to mothers and children.  This amendment applies to plan years beginning after December 31, 2018.


The CARES Act adds some additional coverage requirements to those imposed by the Families First Coronavirus Response Act (see our LEGALcurrents here) and eases some restrictions with the goal of facilitating access to care.

COVID-19 Testing and Preventive Care

As part of the Families First Coronavirus Response Act, Congress required employer-sponsored group health plans to provide COVID-19 diagnostic testing with no cost-sharing that has been approved by the Food and Drug Administration (“FDA”).  In addition, plans must cover office visits with no cost-sharing if the office visit leads to the order of or administration of a COVID-19 test.  Prior authorization and other medical management requirements cannot be applied. The CARES Act expands testing, requiring group health plans and health insurance issuers to cover, without cost-sharing to the participant, COVID-19 testing:

  • (1) where the test developer has requested or intends to request emergency use authorization;
  • (2) developed in and authorized by a State that has notified HHS; and
  • (3) any other test that HHS determines appropriate. 

The CARES Act regulates reimbursement rates from group health plans and health insurers for providers of COVID-19 testing.  If there has been a negotiated rate, group health plans are required to cover such testing at the in-network provider negotiated price throughout the emergency period.  If the group health plan has not negotiated a rate with a provider, the amount will be equal to the cash price as listed by the provider on a public internet website (Providers are required to publish cash prices on a public interest website.).  Group health plans are also permitted to negotiate lower prices with the providers. 

Under the CARES Act group health plans and insurance issuers offering group or individual health insurance are required to cover any qualifying coronavirus preventive services, without cost sharing to the participant.  A qualifying coronavirus preventive service is an item, service, or immunization that is intended to prevent or mitigate coronavirus disease that is

  • (1) an evidence-based item or service with an “A” or “B” rating from the US Preventive Services Task Force (“USPSTF”), or
  • (2) an immunization with a recommendation from CDC.

Currently under the Affordable Care Act, the law permits a plan to delay covering certain preventive services or medications until the plan year that begins one year after an item or service receives an A or B recommendation from the USPSTF.  The CARES Act accelerates the timeframe for the plan to cover such services or medications, requiring coverage with no-cost sharing 15 days after a recommendation is made by the USPSTF or CDC.

High Deductible Plans and Telehealth Services

Under the CARES Act, a health savings account-compatible high deductible health plan (“HDHP”)is permitted to cover all telehealth services, including services beyond COVID-19-related services, before a participant has satisfied the plan deductible, without causing the plan to lose its status as a health savings account-compatible high deductible health plan.  Subsequent IRS guidance (see our LEGALcurrents here) clarifies that this rule is effective with respect to services provided on or after January 1, 2020. It applies for plan years beginning on or before December 31, 2021.  Employers with group health plans will need to decide whether to expand telehealth to provide all services prior to deductible, including for enrollees in the qualified HDHP plan, and this will require a plan amendment.

Over-The-Counter Medical Products as Qualified Medical Expenses

Health flexible spending accounts (“HFSAs”) and health reimbursement arrangements (“HRAs”) may now be used to pay for over the counter medicines and drugs even without a prescription.  Additionally, menstrual care products are now treated as a qualified medical expense which can be paid for using an HFSA and HRA.  Employers are not required to allow their HFSA and HRAs to pay for these expenses, but will need to amend their plans to allow for the change should they choose to implement it. 

In addition, the CARES Act allows health savings accounts (“HSAs”) to pay, on a tax-free basis, for over-the-counter medicines and drugs (even without a prescription) and menstrual care products.  No employer action is required to implement this HSA rule, as it is up to the employee to determine proper tax treatment of HSA distributions. 

These changes apply to amounts paid after December 31, 2019.


Previously, the DOL had the authority to extend Employee Retirement Income Security Act (“ERISA”) related deadlines for one year during a Presidentially declared disaster or a terroristic or military action.  The CARES Act expands the DOL’s authority by including public health emergencies declared by the Secretary of Health and Human Services under Section 319 of the Public Health Service Act. 

The DOL has taken advantage of this authority to extend a number of deadlines relating to participants, beneficiaries and claimants as well as deadlines for plan communications.  The Department also announced modified fiduciary enforcement policies in the same set of guidance.  More information about the extensions for participants, beneficiaries and claimants as well as the deadline for a plan to send a COBRA notice is available in our LEGALcurrents here.  Details on the general extension for plan communications and the Department’s modified fiduciary enforcement policies for fiduciaries acting diligently and in good faith are available in our LEGALcurrents here.

In terms of IRS deadlines, as noted above, the IRS’ Notice 2020-23 extended various deadlines that would otherwise fall between April 1st and July 15th until July 15th.  In addition, the deadline for adoption of pre-approved plan documents for defined benefit plans and associated determination letter applications has been extended from April 30, 2020 to July 31, 2020, and the opening of the submission period for new pre-approved defined benefit plan documents has been delayed until August 31, 2020.  The deadline for adoption of pre-approved 403(b) documents has been extended from March 31, 2020 to June 30, 2020.

The Pension Benefit Guaranty Corporation’s (“PBGC”) disaster relief policy is tied to the IRS’ extension authority, and therefore the PBGC has aligned with IRS Notice 2020-23 by providing for the extension of a number of PBGC deadlines until July 15th, as explained in this PBGC press release.  Affected deadlines include premium payment deadlines but exclude certain deadlines considered to involve risks to plans and the PBGC, such as the deadlines for specified reportable events or for reporting large unpaid contributions.


The IRS has issued guidance allowing additional flexibility for changing elections under Section 125 plans (often referred to as “cafeteria” plans, “flex” plans, or “flexible benefits” plans).  The guidance also allows additional time for “spending down” health care and dependent care flexible spending account balances and provides additional flexibility on some other flexible spending account rules.  More information is available in our LEGALcurrents here.


In addition to implementing the CARES Act provisions discussed above (to the extent desired, in the case of optional provisions), making updates as appropriate to Section 125 plan and flexible spending account rules, and identifying any adjustments to compliance deadlines, plan sponsors and fiduciaries should be mindful of the other implications of the pandemic for their benefit plans, such as:

Participant Payment Access

Participants facing financial stress may be seeking access to their retirement savings, but be unable to qualify for a CARES Act loan or CRD.  For example, a participant facing the loss of a spouse or partner’s income due to a furlough may be in financial distress but not be a “qualified individual.”  In some cases, access to retirement savings may be available under a plan’s normal rules.  For example, if plan loans are permitted, a participant can borrow under the usual rules and limits. Likewise, most defined contribution plans allow for payment at any time for individuals who have terminated employment, and some defined benefit plans do as well.  Defined contribution plans often allow in-service payments to individuals who have reached a specified age (usually age 59½, the normal statutory minimum age for access to elective deferrals, qualified matching and nonelective contributions, or money purchase pension benefits), and may make certain types of contributions (most frequently rollover contributions and after-tax contributions) available without preconditions.  Some defined benefit plans also offer in-service payment options to those who meet minimum age requirements.

If a plan allows for hardship withdrawals, individuals may be able to qualify if their financial need involves an approved hardship event under their plan.  Most plans use the IRS’ list of qualifying hardship events.  This list includes common pandemic financial emergencies such as medical expenses, funeral expenses and the need to prevent eviction from or foreclosure on the participant’s principal residence as qualifying hardships.  Many plans also have now added a new hardship event authorized by the IRS in its regulations finalized in 2019, which permits a hardship withdrawal for individuals who experience “expenses and losses (including loss of income)” due to a disaster declared by the Federal Emergency Management Agency (“FEMA”), provided that “the employee's principal residence or principal place of employment at the time of the disaster was located in an area designated by FEMA for individual assistance with respect to the disaster.”[7]  Since many states have been designated as disaster areas approved for crisis counseling (a form of individual assistance) as a result of the pandemic, individuals who have experienced expenses and losses as a result of the pandemic may qualify for a hardship withdrawal even if they do not fit the specific “qualified individual” definition necessary for a CRD, or if a CRD is unavailable (e.g., because the employer has opted not to offer this feature, or because the individual has already withdrawn $100,000).

Employers whose defined contribution plans (excluding money purchase pension plans) include employer money other than qualified nonelective, qualified matching and safe harbor contributions may also opt to allow more expansive in-service access than usual for this money on a temporary basis.  However, any decision to add a feature of this sort should be discussed with counsel to be sure the new feature is designed to comply with statutory restrictions on plan payments and to satisfy all other compliance requirements.  Employers should also coordinate with their recordkeepers to be sure any new feature is administrable at a reasonable cost.  An optional plan change of this sort likely will require an amendment before the end of the plan year in which it is implemented, unless the IRS grants administrative relief from the usual amendment deadlines.  The CARES Act extended deadline will not apply.

Of course, regardless of the distribution event, a plan that is subject to spousal consent requirements must be sure that proper spousal consent is obtained before making payment.  Current social distancing rules may make obtaining notarization more difficult.  Accordingly, the IRS has issued Notice 2020-42 to allow participants and beneficiaries making elections during 2020 that require notarization (such as distribution requests for which spousal consent is required) to use remote notarization when permitted by state law or remote witnessing by a plan representative, if certain safeguards are met.[8].

On a final note with respect to distribution/withdrawal features, some recordkeepers have waived distribution, loan and withdrawal fees during the pandemic for some or all transactions.  Fiduciaries should be aware of their obligation to issue updated fee disclosures as appropriate.

Plan Investment Oversight

The pandemic has roiled financial markets worldwide, leading to significant losses in asset value and disrupting market liquidity.  While the situation has stabilized somewhat, especially with respect to liquidity, plan fiduciaries should keep in touch with their investment professionals regarding:

  • The continued appropriateness of investment line-ups for participant-directed defined contribution plans
  • Any recommendations for portfolio adjustment or rebalancing for fiduciary-managed plan assets
  • Maintenance of adequate liquidity for the plan as a whole and with respect to specific investments
  • Other actions recommended or insights provided by the investment professional

Plan fiduciaries who are concerned about their ability to meet their fiduciary responsibilities due to furloughs, illness, the press of other demands related to the pandemic, or other reasons may want to consider engaging an investment professional to take responsibility for investment oversight.  This type of arrangement is often referred to as a “3(38)” investment management arrangement, in reference to Section 3(38) of ERISA, which sets forth the requirements an investment manager must meet in order to exercise discretionary investment authority as a plan investment manager.  Many investment consultants offer both advisory arrangements (often called “3(21)” arrangements) and discretionary 3(38) arrangements.  A plan fiduciary interested in retaining a new consultant during the crisis or increasing the responsibilities of an existing consultant to convert the relationship to a 3(38) relationship must, as always, act prudently and in the best interests of plan participants, and must ensure that total compensation is reasonable for the services provided.

Benefit Reduction

Some employers have reduced or eliminated plan contributions or benefit accruals, or are considering doing so.  While in most cases it is permissible to make this type of change on a prospective basis, employers should consult counsel to be sure they understand any restrictions that may apply, whether a plan amendment is required and when such an amendment is due, and whether advance notice is required or advisable.  For example, defined benefit plans and money purchase plans require a 45-day notice in most cases before future benefits can be reduced or stopped (a shorter notice period is available in some cases).  “Safe harbor” 401(k) and 403(b) plans are also subject to special notice and amendment restrictions.  Employers should be mindful of the potential impact of any changes on non-discrimination testing and plan limits, such as the possible need to pro-rate the Section 401(a)(17) compensation limit.  Employers with unionized workforces should make sure to discuss their collective bargaining obligations with labor counsel.

Partial Termination Concerns

If an employer significantly reduces its workforce, a plan may experience a “partial termination,” requiring “affected participants” to become fully vested.  While the existence of a partial termination ultimately depends on the facts and circumstances, the IRS takes the position that a 20% “turnover rate” (i.e., a 20% or greater reduction in plan participation) generally is considered “significant” enough to cause a partial termination.  The IRS also has ruled that the turnover rate must be determined by dividing (i) the number of participating employees (this includes everyone eligible, whether actually contributing or not) who incurred an employer-initiated severance from employment (i.e., involuntary terminations other than death, disability, or retirement (on or after normal retirement age) during the partial termination measuring period by (ii) the sum of all participating employees at the beginning of that period and those individuals who became participating employees during that period.

In most cases, the turnover rate is calculated based on the plan year, absent a “related” series of terminations spread across multiple years that require aggregation.  With this in mind, employees who are temporarily laid off or furloughed during the year but actively employed at the start and end of the year should not adversely affect the calculation.  In addition, an employee who is furloughed but still being credited with vesting service and otherwise treated as employed may be able to be counted as still active; the employer should review its particular situation with counsel in the absence of specific IRS guidance.

More details are available in our LEGALcurrents here.

Participant Education

Plan fiduciaries are not obligated to provide participants with investment or financial education or advice, and must meet various legal requirements if they choose to do so.  However, many employers want to provide some outreach regarding general financial guidelines for employees facing financial stress as a result of the pandemic.  Many employers also want to make sure their employees know about physical and mental health care resources available under their group health and employee assistance programs.  Plan fiduciaries should be sure communications are designed to meet applicable legal rules as well as to accomplish the employer’s communications goals, and should review any materials provided to participants by recordkeepers, claims administrators or other vendors.

Pension Plan Concerns

The CARES Act provided some additional flexibility for plan funding, but plan fiduciaries still need to ensure that funding levels overall and liquidity levels in particular are adequate for the plan to pay benefits.  Plan fiduciaries also need to monitor the plan’s and employer’s situations to identify any circumstances that might require a reportable event or Section 4062(e) filing.[9]  For example, if the employer goes into default on a loan with an outstanding balance of $10,000,000 or more (even if the lender waives the default), a filing generally will be required.  Some reportable events, including the loan default event, are not eligible for the PBGC’s disaster relief extension.

If you have any questions regarding this LEGALcurrents, please contact any member of the Employee Benefits and Executive Compensation group at 585.232.6500 or 716.853.1616.


[1] Sponsors of plans which are dual-qualified in Puerto Rico should bear in mind that the special distribution rules available in connection with the pandemic under Puerto Rico law overlap with but are not identical to U.S. law, and consult Puerto Rico counsel about permissible payment options and Puerto Rico tax implications.

[2] The IRS’ FAQ says that, “In general, it is anticipated that eligible retirement plans will accept repayments of coronavirus-related distributions, which are to be treated as rollover contributions. However, eligible retirement plans generally are not required to accept rollover contributions. For example, if a plan does not accept any rollover contributions, the plan is not required to change its terms or procedures to accept repayments.”  Since the IRS remarked on plans that do not accept any rollovers as an “example” of not being required to change terms or procedures and acknowledged that plans normally are not required to accept rollovers, it seems reasonable to expect that a plan can apply its usual processes and restrictions to these contributions.  For instance, if a participant has since terminated employment and the plan does not accept rollovers from former employees, the IRS has not said the plan must nonetheless accept a CARES Act rollover from this terminated participant.  However, further guidance is necessary to confirm the scope of repayment acceptance obligations.

[3] EBSA Notice 2020-01 confirmed that this suspension also is permissible notwithstanding the normal regulatory rules on loan repayments.  However, plans which are dual-qualified in Puerto Rico should bear in mind that Puerto Rico law does not provide for a similar exception.

[4] IRA owners are subject to required minimum distributions regardless of employment status.  Qualified plans, however, do not need to start required minimum distributions until a participant has both attained the requisite age and terminated employment, unless the individual is considered a “5% owner” of the business.

[5] The statute does not specifically address the 10-year period applicable to many non-spousal beneficiaries under the SECURE Act.  The IRS will need to indicate whether the waiver should be considered incorporated by reference into that deadline or whether the 10-year period must include 2020.

[6] Since non-spousal beneficiaries can only roll payments over via direct rollover, a non-spousal beneficiary who had already taken payment in 2020 will not be able to roll the payment back into a plan unless the IRS issues relief.

[7] This situation is not an approved hardship event under Puerto Rico law.

[8] See our LEGALcurrents here for details.

[9] See our newsletter at


Click here to view COVID-19 Cares Act Provisions and Other Employee Benefits Developments as a PDF

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