Quarterly HOT Topic: The CARES Act

The CARES act, which passed congress just three months after the SECURE ACT (not to be confused), further changes some rules for retirement plans.  While the bill has many provisions targeted to programs and agencies that indirectly aid us all, the focus here is solely on provisions in the bill that directly aid an individual. 

The CARES ACT  — which stands for “Coronavirus Aid, Relief and Economic Security Act” — puts into place numerous provisions!

As the name implies the bill intends to provide relief to folks impacted by coronavirus (COVID-19).  While this appears to be everyone, the bill defines “Impacted” as:  One (or spouse) who has been infected by COVID, or suffered adverse financial consequences due to COVID.

Recovery Rebates (aka stimulus checks):

By now most folks have already received these monies if eligible.  The maximum amounts provided are $1200 per individual or $2400 for married couple.  Incomes less than $75,000 per individual or $150,000 per married couple provide this maximum stimulus while higher incomes begin phaseout.

Required Minimum Distributions (RMDs): 

All RMD’s due in 2020 do not have to be paid.  Furthermore, if you already have distributed monies for an RMD payment, the monies can be put back…. making this rule retroactive to beginning of 2020.

This is not a postponement – which implies making up for the 2020 amount in the future.  Rather a waiver – so if you do not need these monies for current living needs, you can consider postponing or returning.


Retirement Plans – penalty free withdrawals in 2020.

Folks “Impacted” by coronavirus, with IRAs and under 59 ½ can withdraw up to $100,000 without the normal 10% early distribution penalty.  Employer Plans (i.e. 401k’s) may allow the same but it depends upon your employer – so you need to check with the plan first.

While your Employer Plan may have a loan provision, this is not a loan!  It is a distribution and is a taxable event which must be taken before 12/30/2020.

While it is a taxable event, the normal tax liability has been relaxed.   For 2020’s distribution, the taxable income will be due in equal parts over the next three years (2020-2022).  Optionally, the recipient can choose to include in a single year or 2 of 3-year period.  Lastly, the recipient can choose to “roll it back” which must be done within the same 3-year period.

Small Business Paycheck Protection Program:

For small business owners (less than 500 employees), there are monies set aside to aid employer in continuing payroll to employees for a targeted need of eight weeks.  Loans may be forgiven if provisions of the loan program are met.

While the above covers some highlights of these provisions in the CARES ACT, it is not intended to be an exhaustive review. Furthermore, it is based upon my understanding of the laws at the time of this issue.  Please consult with your tax professional and or legal counsel for further advice.  

Stay Safe!

Pete Thoresen


Securities offered through Royal Alliance Associates Inc., member FINRA/SIPC. Investment advisory services offered through Focus Financial Network, Inc., a registered investment advisor not affiliated with Royal Alliance Associates, Inc.  /  1000 Shelard Parkway, Suite 300, Minneapolis, MN  55426