The federal CARES Act recently passed to address financial hardships that might arise as a result of the COVID-19 pandemic.
Part of the act increases the ability to take loans or withdrawals from your retirement savings. You may be eligible for withdrawals or loans from your savings if:
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You have been diagnosed with COVID-19 by a test approved by the Centers for Disease Control and Prevention.
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Your spouse or dependent has been diagnosed with COVID-19.
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You suffer financial consequences as a result of quarantine, employment furlough, layoffs, reduced work hours or inability to work because of lack of childcare as a result of COVID-19.
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You experience a financial loss to an individually owned or operated business that is caused by a closing or reduction of hours due to COVID-19.
Withdrawals (applies to all UK retirement plans)
If you make an early withdrawal from your retirement savings, the CARES Act waives the 10% early withdrawal penalty and 20% required tax withholding for coronavirus-related withdrawals up to $100,000 or up to 100% of your vested savings balance.
These withdrawals are still subject to taxation, which you can choose to pay over a three-year period. It’s best to consult with a tax adviser to make the best decision for your situation.
The act also allows you to pay back these withdrawals over a three-year period, even if those contributions to your savings would put you over the normal annual contribution limit.
These withdrawals are available until December 31, 2020.
Loans (applies to all UK retirement plans)
The CARES Act also increases the amount you may borrow from your retirement savings to $100,000 or 100% of your vested savings balance until September 23, 2020.
Loans from your retirement savings are still subject to the University’s loan policy, which limits you to three outstanding loans at any one time, with no defaults.
If you have existing loans from your retirement savings, you may be able to defer payments on those loans for up to a year.
Please seek a financial adviser’s advice on whether a withdrawal or loan might be the best option if you qualify.
Required minimum distributions
If you are currently taking the required distribution from your retirement savings every year, the CARES Act also suspends those distributions for 2020. If you would like to continue to take distributions from your retirement savings, contact Fidelity or TIAA.