IRS Answers Common CARES Act Questions


For those who are perplexed about the recent CARES Act legislation, the IRS has some answers for you. The organization laid out 14 common questions and answers to the May 4 Q&As concern Section 2202 of the CARES Act, which offers special rollover rules and distribution options for IRAs and retirement plans while expanding permissible loans from specific retirement plans.

These questions target major areas of concern regarding the act, including the agency’s plan to issue further guidance. Aside from affirming their intention to do so “in the near future”, they specifically cite IRS Notice 2005-92 that give guidance on the tax-favored treatment of plan loans and distributions under sections 101 and 103 of the Katrina Emergency Tax Relief Act of 2005.

The IRS’ Q&A outlines how:

  • COVID distribution taxes can be paid, either all at once in the distribution year or ratably over a three-year period.
  • The repayment of said distributions can be done to recover taxes paid/withheld (amended tax returns for the years in question) and to utilize Form 8915-E to document any repayment of a coronavirus-related distribution and to calculate the amount of any coronavirus-related distribution includible in income for a year.
  • The adoption of COVID loan provisions and distributions is elective at an employer’s discretion.
  • The final day to obtain a COVID-19 loan with the increased limits is September 22, 2020 instead of September 23, 2020.
  • The COVID distribution cannot be made from the pension plans, including money purchase pension plans any sooner than permitted under the pension plan rules.
  • While it is projected that plans will allow COVID distribution repayments, plans that do not accept rollovers will not be compelled to modify procedures or terms to allow repayments.
  • An eligible person may regard a distribution that meets requirements to be coronavirus-related distribution as such, regardless of if qualified retirement plan treats the distribution as a coronavirus-related distribution.

If you are an individual involved in the management of an employee retirement plan, you can face personal exposure to claims alleging breach of fiduciary duty. Colonial Surety Company offers fiduciary liability insurance for plan sponsors in our ERISA fidelity bond packages, which come with an ERISA bondfiduciary liability insurance, and cyber liability insuranceCyber liability insurance protects the pension and the business from cyber breaches. Fully protect your plan, yourself, and your company all in one place, instantly online. Contact us today to get your coverage online, instantly.