Frequently Asked Questions (FAQ)

The Coronavirus Aid, Relief, and Economic Security (CARES) Act introduced temporary provisions for retirement plans, including Coronavirus-Related Distributions (CRDs), expanded loan limits, and waived certain Required Minimum Distributions (RMDs) for the 2020 calendar year.

What is a CRD (Coronavirus-Related Distribution)?
A CRD is a special type of distribution that plan sponsors could allow under the CARES Act. It applies to 401(k), 403(b), governmental 457(b), defined benefit plans, and IRAs. CRDs are not subject to the standard 10% early withdrawal penalty and can be repaid within three years.

Who qualifies for a CRD?
A “qualified individual” includes:

• Anyone diagnosed with COVID-19 (or whose spouse/dependent was diagnosed)
• Someone experiencing adverse financial consequences from being quarantined, furloughed, laid off, having reduced work hours, or inability to work due to childcare needs
• Business owners who had to close or reduce operating hours

Participants may self-certify eligibility—no external documentation is required.

When could a CRD be taken?
CRDs could be taken between January 1, 2020 and December 30, 2020. Distributions made during this time may be retroactively classified as CRDs.

How much could be distributed under a CRD?
A maximum of $100,000 per individual, across all eligible retirement accounts. The amount could be taken in a lump sum or spread over multiple withdrawals in 2020.

Do CRDs have tax penalties or mandatory withholding?

• The 10% early withdrawal penalty is waived regardless of age.
• Mandatory 20% federal tax withholding does not apply.
• The default 10% withholding applies unless the participant opts out or changes the rate.

Can the CRD be repaid?
Yes. Participants have three years from the date of the distribution to repay it, either in one lump sum or installments. Repayments are treated as rollover contributions.

How will CRDs be taxed?
Any amount not repaid will be included in income and taxed over three years—unless the participant elects otherwise.

Are plan amendments required?
Not immediately. However, plans that operated under the CARES Act provisions must eventually be amended to reflect these changes.

Will my recordkeeper need instructions?
Most recordkeepers reached out with opt-in or opt-out instructions. If unsure, contact DRDA for guidance on aligning your plan with your provider’s process.

What if a participant prefers a loan instead of a CRD?
The CARES Act temporarily increased the loan limit and allowed eligible participants to defer repayments.

• Loans up to $100,000 (or 100% of vested account balance)
• Available from March 27, 2020 through September 22, 2020

When must loan repayments begin?
Participants could defer repayment for up to one year. The five-year repayment term was also extended by one year.

Do existing loans qualify for relief?
Yes, if the loan was in good standing as of March 27, 2020. Even terminated participants may qualify for deferral (pending IRS guidance).

Will interest accrue during the deferral period?
Yes, interest continues to accrue on outstanding loan balances during the delay.

Are Required Minimum Distributions (RMDs) waived for 2020?
Yes, for most plan types including IRAs, 401(k)s, ESOPs, and 403(b) plans. Defined benefit plans were not covered under this waiver.

What if an RMD was already taken in 2020?
The IRS allowed rollovers of certain RMDs distributed prior to the CARES Act. Check with DRDA to confirm if you’re eligible.