Guidance for Coronavirus-Related Distributions and Loans from Retirement Plans Under the CARES Act

Guidance for Coronavirus-Related Distributions and Loans from

Retirement Plans Under the CARES Act

Notice 2020-50

PURPOSE

This notice provides guidance relating to the application of section 2202 of

the Coronavirus Aid, Relief, and Economic Security Act, Pub. L. 116-136, 134

Stat. 281 (2020) (CARES Act) for qualified individuals and eligible retirement

plans. The CARES Act was enacted on March 27, 2020. Under section 2202 of

the CARES Act, qualified individuals receive favorable tax treatment with respect

to distributions from eligible retirement plans that are coronavirus-related

distributions. A coronavirus-related distribution is not subject to the 10%

additional tax under § 72(t) of the Internal Revenue Code (Code) (including the

25% additional tax under § 72(t)(6) for certain distributions from SIMPLE IRAs),

generally is includible in income over a 3-year period, and, to the extent the

distribution is eligible for tax-free rollover treatment and is contributed to an

eligible retirement plan within a 3-year period, will not be includible in income.

Section 2202 of the CARES Act also increases the allowable plan loan amount

under § 72(p) of the Code and permits a suspension of payments for plan loans

outstanding on or after March 27, 2020, that are made to qualified individuals.

The guidance in this notice is intended to assist employers and plan

administrators, trustees and custodians, and qualified individuals in applying

section 2202 of the CARES Act, including by providing guidance on how plans

may report coronavirus-related distributions and how individuals may report

these distributions on their individual federal income tax returns.

BACKGROUND

A. Distributions

Under § 402(c)(8), an eligible retirement plan includes an individual

retirement arrangement (IRA) under § 408(a) or (b), a qualified plan under

§ 401(a), an annuity plan under § 403(a), a § 403(b) plan, and a governmental

deferred compensation plan under § 457(b)

w individuals may report

these distributions on their individual federal income tax returns.

BACKGROUND

A. Distributions

Under § 402(c)(8), an eligible retirement plan includes an individual

retirement arrangement (IRA) under § 408(a) or (b), a qualified plan under

§ 401(a), an annuity plan under § 403(a), a § 403(b) plan, and a governmental

deferred compensation plan under § 457(b). Distributions from these plans

generally are includible in the distributee’s gross income in the year of the

distribution. For example, for qualified plans, § 402(a) provides that any amount

actually distributed to a distributee is taxable to the distributee in the taxable year

of the distribution under § 72. Similar rules apply to § 403(b) plans under

§ 403(b)(1), governmental § 457(b) plans under § 457(a), and IRAs under

§ 408(d)(1).

Section 402(c)(4) provides that any distribution of all or a portion of the

balance to the credit of an employee under a qualified plan is an eligible rollover

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distribution with certain exceptions. These exceptions include substantially equal

periodic payments over a specified period of at least 10 years, or for the life or

the life expectancy of the employee (or the employee and the employee’s

designated beneficiary); minimum distributions required under § 401(a)(9); and

any distribution that is made upon the hardship of an employee. This same

definition of eligible rollover distribution applies to distributions from § 403(b)

plans under § 403(b)(8) and governmental § 457(b) plans under § 457(e)(16).

Generally, any distribution from an IRA is eligible for rollover except a required

minimum distribution or certain distributions from inherited IRAs. Section 2203 of

the CARES Act provides that, for eligible retirement plans other than defined

benefit plans, no minimum distributions under § 401(a)(9) are required for 2020

under § 403(b)(8) and governmental § 457(b) plans under § 457(e)(16).

Generally, any distribution from an IRA is eligible for rollover except a required

minimum distribution or certain distributions from inherited IRAs. Section 2203 of

the CARES Act provides that, for eligible retirement plans other than defined

benefit plans, no minimum distributions under § 401(a)(9) are required for 2020.

Under § 401(a)(31)(A), if a distributee elects to have an eligible rollover

distribution paid directly to an eligible retirement plan and specifies the eligible

retirement plan to receive the distribution, a qualified plan must pay the

distribution to that eligible retirement plan in a direct rollover. Similar rules apply

to § 403(b) plans under § 403(b)(10) and governmental § 457(b) plans under

§ 457(d)(1).

Q&A-14 of § 1.401(a)(31)-1 provides that if a plan accepts an invalid

rollover contribution, for purposes of applying the qualification requirements to

the receiving plan, the contribution will be treated as if it were a valid rollover

contribution if two conditions are satisfied. First, when accepting the amount

from the employee as a rollover contribution, the plan administrator of the

receiving plan reasonably concludes that the contribution is a valid rollover

contribution. Second, if the plan administrator later determines that the rollover

contribution was an invalid rollover contribution, any amount attributable to the

invalid rollover contribution (including earnings) must be distributed to the

employee within a reasonable amount of time after the determination.

Under § 402(c), if an eligible rollover distribution is contributed to an

eligible retirement plan in a direct rollover or within 60 days from the date of

distribution as a rollover contribution, the amount rolled over is not includible in

the distributee’s gross income

ution (including earnings) must be distributed to the

employee within a reasonable amount of time after the determination.

Under § 402(c), if an eligible rollover distribution is contributed to an

eligible retirement plan in a direct rollover or within 60 days from the date of

distribution as a rollover contribution, the amount rolled over is not includible in

the distributee’s gross income. In certain situations, the 60-day rollover period is

extended; for example, under § 402(c)(3), the rollover period for qualified plan

loan offsets is extended to the federal income tax return deadline for the year of

the distribution.

Section 401(k)(2)(B)(i) generally provides that amounts attributable to

elective contributions under a qualified cash or deferred arrangement may not be

distributable to participants or beneficiaries earlier than severance from

employment, death or disability, plan termination, attainment of age 59½,

hardship of the employee, entitlement to a qualified reservist distribution, or, for

amounts held in lifetime income investments, 90 days prior to the date that the

lifetime income investment is no longer held by the arrangement. Similar rules

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apply to custodial accounts under § 403(b)(7)(A)(i), to annuity contracts under

§ 403(b)(11), and to governmental § 457(b) plans under § 457(d)(1)(A).

Section 72(t)(1) imposes an additional tax on early distributions from

eligible retirement plans (other than governmental § 457(b) plans, unless a

distribution is attributable to an amount that was transferred to the § 457(b) plan

from a plan that was subject to § 72(t)). In general, this additional tax is equal to

10% of the portion of the distribution that is includible in income. For any amount

distributed from a SIMPLE IRA during the 2-year period described in § 72(t)(6),

the rate of the additional tax is increased from 10% to 25%

distribution is attributable to an amount that was transferred to the § 457(b) plan

from a plan that was subject to § 72(t)). In general, this additional tax is equal to

10% of the portion of the distribution that is includible in income. For any amount

distributed from a SIMPLE IRA during the 2-year period described in § 72(t)(6),

the rate of the additional tax is increased from 10% to 25%. Section 72(t)(2)

provides a number of exceptions to this additional tax, including, for example,

exceptions for distributions made on or after the employee attains age 59½,

distributions made to a beneficiary on or after the employee’s death, distributions

made because of the employee’s disability, and distributions that are part of

substantially equal periodic payments made over the employee’s life or life

expectancy.

Section 402(f) provides that a plan is required to provide a distributee,

within a reasonable period of time before an eligible rollover distribution is made,

a written explanation of the distributee’s rollover rights and the tax and other

potential consequences of the distribution or rollover.

B. Plan loans

Section 72(p) imposes certain requirements relating to plan loans. Unless

these requirements are satisfied, an amount received by a participant as a loan is

treated as having been received as a distribution from the plan (deemed

distribution). Deemed distributions are includible in income and are subject to

the 10% additional tax under § 72(t), unless an exception applies

B. Plan loans

Section 72(p) imposes certain requirements relating to plan loans. Unless

these requirements are satisfied, an amount received by a participant as a loan is

treated as having been received as a distribution from the plan (deemed

distribution). Deemed distributions are includible in income and are subject to

the 10% additional tax under § 72(t), unless an exception applies.

Under § 72(p)(2)(A), a plan loan (when added to the outstanding balance

of all other loans outstanding) must not exceed the lesser of (1) $50,000 reduced

by the excess of the highest outstanding balance of loans from the plan during

the 1-year period ending on the day before the date on which the loan is made

over the outstanding balance of loans from the plan on the date that the loan is

made, or (2) the greater of $10,000 or one-half of the present value of the

participant’s nonforfeitable accrued benefit under the plan. Section 72(p)(2)(B)

provides that a loan must be repaid within 5 years. However, an exception to the

5-year repayment rule applies for loans used to acquire any dwelling unit that will

be used (determined at the time the loan is made) as the participant’s principal

residence. Section 72(p)(2)(C) requires substantially level amortization of a plan

loan (with payments not less frequently than quarterly) over the term of the loan.

Q&A-10(a) of § 1.72(p)-1 provides that the failure to make any installment

payment when due, in accordance with the terms of a loan, violates § 72(p)(2)(C)

and, accordingly, results in a deemed distribution at the time of the failure.

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However, the plan administrator may allow a cure period, and § 72(p)(2)(C) will

not be considered to have been violated if the installment payment is made not

later than the end of the cure period, which cannot continue beyond the last day

of the calendar quarter following the calendar quarter in which the required

installment payment was due

emed distribution at the time of the failure.

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However, the plan administrator may allow a cure period, and § 72(p)(2)(C) will

not be considered to have been violated if the installment payment is made not

later than the end of the cure period, which cannot continue beyond the last day

of the calendar quarter following the calendar quarter in which the required

installment payment was due. If there is a failure to pay the installment

payments required under the terms of the loan (taking into account any cure

period allowed under Q&A-10(a)), then the amount of the deemed distribution

equals the entire outstanding balance of the loan (including accrued interest) at

the time of the failure. Under Q&A-13(b) of § 1.72(p)-1 and Q&A-9(b) of

§ 1.402(c)-2, a distribution of a plan loan offset amount occurs when, under the

terms governing a plan loan, the accrued benefit of a participant or beneficiary is

reduced (or offset) in order to repay the loan (including the enforcement of the

plan’s security interest in the accrued benefit). In the event of a plan loan offset,

including a qualified plan loan offset described in § 402(c)(3)(C), the amount of

the account balance that is offset against the loan is an actual distribution, not a

deemed distribution.

SECTION 1. CORONAVIRUS-RELATED DISTRIBUTIONS

A. Special tax treatment for coronavirus-related distributions

Section 2202(a) of the CARES Act provides for special tax treatment for a

coronavirus-related distribution

fied plan loan offset described in § 402(c)(3)(C), the amount of

the account balance that is offset against the loan is an actual distribution, not a

deemed distribution.

SECTION 1. CORONAVIRUS-RELATED DISTRIBUTIONS

A. Special tax treatment for coronavirus-related distributions

Section 2202(a) of the CARES Act provides for special tax treatment for a

coronavirus-related distribution. The section provides an exception to the 10%

additional tax under § 72(t) of the Code (including the 25% additional tax under

§ 72(t)(6) for certain distributions from SIMPLE IRAs), allows the distribution to

be included in income ratably over 3 years, and provides that the distribution will

be treated as though it were paid in a direct rollover to an eligible retirement plan

if the distribution is eligible for tax-free rollover treatment and is recontributed to

an eligible retirement plan within the 3-year period beginning on the day after the

date on which the distribution was received. The section also permits special

treatment for coronavirus-related distributions under employer retirement plans

(eligible retirement plans other than IRAs), as described in section 2 of this

notice.

B. Definition of qualified individual

Pursuant to section 2202(a)(4)(A)(ii) of the CARES Act, a qualified

individual for purposes of this notice is an individual:

• who is diagnosed with the virus SARS-CoV-2 or with coronavirus

disease 2019 (referred to collectively in this notice as COVID-19)

by a test approved by the Centers for Disease Control and

Prevention (including a test authorized under the Federal Food,

Drug, and Cosmetic Act);

• whose spouse or dependent (as defined in section 152 of the

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Code) is diagnosed with COVID-19 by a test approved by the

Centers for Disease Control and Prevention (including a test

authorized under the Federal Food, Drug, and Cosmetic Act; or

• who experiences adverse financial consequences as a result of:

o the individual being quarantined, being furloughed

, and Cosmetic Act);

• whose spouse or dependent (as defined in section 152 of the

5

Code) is diagnosed with COVID-19 by a test approved by the

Centers for Disease Control and Prevention (including a test

authorized under the Federal Food, Drug, and Cosmetic Act; or

• who experiences adverse financial consequences as a result of:

o the individual being quarantined, being furloughed or laid off,

or having work hours reduced due to COVID-19;

o the individual being unable to work due to lack of childcare

due to COVID-19; or

o closing or reducing hours of a business owned or operated

by the individual due to COVID-19.

In addition, pursuant to the authority of the Secretary to issue guidance to

provide for other factors under section 2202(a)(4)(A)(ii)(III) of the CARES Act, a

qualified individual for purposes of this notice is an individual who experiences

adverse financial consequences as a result of:

• the individual having a reduction in pay (or self-employment

income) due to COVID-19 or having a job offer rescinded or start

date for a job delayed due to COVID-19;

• the individual’s spouse or a member of the individual’s household

(as defined below) being quarantined, being furloughed or laid off,

or having work hours reduced due to COVID-19, being unable to

work due to lack of childcare due to COVID-19, having a reduction

in pay (or self-employment income) due to COVID-19, or having a

job offer rescinded or start date for a job delayed due to COVID-19;

or

• closing or reducing hours of a business owned or operated by the

individual’s spouse or a member of the individual’s household due

to COVID-19.

For purposes of applying these additional factors, a member of the individual’s

household is someone who shares the individual’s principal residence.

C

9, or having a

job offer rescinded or start date for a job delayed due to COVID-19;

or

• closing or reducing hours of a business owned or operated by the

individual’s spouse or a member of the individual’s household due

to COVID-19.

For purposes of applying these additional factors, a member of the individual’s

household is someone who shares the individual’s principal residence.

C. Definition of coronavirus-related distribution

Section 2202(a)(4)(A) of the CARES Act defines a coronavirus-related

distribution as any distribution from an eligible retirement plan made on or after

January 1, 2020, and before December 31, 2020, to a qualified individual.

Section 2202(a)(2) of the CARES Act limits the amount of aggregate distributions

6

from all eligible retirement plans that can be treated as coronavirus-related

distributions to no more than $100,000.

In general, a qualified individual is permitted to designate a distribution

described in the preceding paragraph as a coronavirus-related distribution. This

designation is permitted to be made with respect to any distribution to a qualified

individual that would meet the requirements of a coronavirus-related distribution

without regard to whether the plan treated the distribution as a coronavirus-

related distribution. Thus, periodic payments and distributions that would have

been required minimum distributions but for section 2203 of the CARES Act,

received by a qualified individual from an eligible retirement plan on or after

January 1, 2020, and before December 31, 2020, are permitted to be treated as

coronavirus-related distributions and, therefore, permitted to be included in

income ratably over 3 years. Similarly, any distribution received by a qualified

individual as a beneficiary can be treated as a coronavirus-related distribution

ceived by a qualified individual from an eligible retirement plan on or after

January 1, 2020, and before December 31, 2020, are permitted to be treated as

coronavirus-related distributions and, therefore, permitted to be included in

income ratably over 3 years. Similarly, any distribution received by a qualified

individual as a beneficiary can be treated as a coronavirus-related distribution. In

addition, a reduction or offset of a qualified individual’s account balance in order

to repay a plan loan, as described in Q&A-9(b) of § 1.402(c)-2, including a

qualified plan loan offset, is permitted to be treated as a coronavirus-related

distribution. See section 1.D of this notice for rules relating to which coronavirus-

related distributions are permitted to be recontributed to an eligible retirement

plan.

However, any amount described in Q&A-4 of §1.402(c)-2 is not permitted

to be treated as a coronavirus-related distribution. Thus, the following amounts

are not coronavirus-related distributions: corrective distributions of elective

deferrals and employee contributions that are returned to the employee (together

with the income allocable thereto) in order to comply with the § 415 limitations,

excess elective deferrals under § 402(g), excess contributions under § 401(k),

and excess aggregate contributions under § 401(m); loans that are treated as

deemed distributions pursuant to § 72(p); dividends paid on applicable employer

securities under § 404(k); the costs of current life insurance protection; prohibited

allocations that are treated as deemed distributions pursuant to § 409(p);

distributions that are permissible withdrawals from an eligible automatic

contribution arrangement within the meaning of § 414(w); and distributions of

premiums for accident or health insurance under § 1.402(a)-1(e)(1)(i)

ble employer

securities under § 404(k); the costs of current life insurance protection; prohibited

allocations that are treated as deemed distributions pursuant to § 409(p);

distributions that are permissible withdrawals from an eligible automatic

contribution arrangement within the meaning of § 414(w); and distributions of

premiums for accident or health insurance under § 1.402(a)-1(e)(1)(i).

The definition of a coronavirus-related distribution under section

2202(a)(4) of the CARES Act does not limit these distributions to amounts

withdrawn solely to meet a need arising from COVID-19. Thus, for example, for

an individual who is a qualified individual as a result of experiencing adverse

financial consequences as described above, coronavirus-related distributions are

permitted without regard to the qualified individual’s need for funds, and the

amount of the distribution is not required to correspond to the extent of the

adverse financial consequences experienced by the qualified individual.

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As explained in section 2.C of this notice, an employer retirement plan

also is permitted, but not required, to treat a plan distribution meeting the

conditions described in this section 1.C as a coronavirus-related distribution. It is

possible that a qualified individual’s designation of a coronavirus-related

distribution may be different from the employer retirement plan’s treatment of the

distribution. This different treatment could occur, for example, if a qualified

individual has more than one plan distribution that meets the requirements of a

coronavirus-related distribution, but one of those distributions occurs before the

effective date of the plan amendment providing for coronavirus-related

distributions. The different treatment could also occur, for example, if a qualified

individual has distributions from more than one eligible retirement plan, and the

aggregate amount of those distributions exceeds $100,000.

D

ments of a

coronavirus-related distribution, but one of those distributions occurs before the

effective date of the plan amendment providing for coronavirus-related

distributions. The different treatment could also occur, for example, if a qualified

individual has distributions from more than one eligible retirement plan, and the

aggregate amount of those distributions exceeds $100,000.

D. Certain coronavirus-related distributions are permitted to be recontributed

Coronavirus-related distributions may be included in income ratably over 3

years and are not subject to the 10% additional tax under § 72(t). However, only

a coronavirus-related distribution that is eligible for tax-free rollover treatment

under § 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16) is permitted to be

recontributed to an eligible retirement plan, and that recontribution will be treated

as having been made in a trustee-to-trustee transfer to that eligible retirement

plan. Any coronavirus-related distribution (whether from an employer retirement

plan or an IRA) paid to a qualified individual as a beneficiary of an employee or

IRA owner (other than the surviving spouse of the employee or IRA owner)

cannot be recontributed.

In general, a distribution from an employer retirement plan made on

account of hardship is not an eligible rollover distribution. However, if the

distribution satisfies the requirements under section 1.C of this notice, then,

except as otherwise provided in section 6 of this notice (relating to nonqualified

deferred compensation plans), the distribution is not treated as made on account

of hardship for purposes of this notice and, thus, any portion of the distribution is

permitted to be recontributed to an eligible retirement plan.

See section 4.C of this notice for rules relating to recontributions of

coronavirus-related distributions.

SECTION 2. GUIDANCE FOR EMPLOYER RETIREMENT PLANS MAKING

CORONAVIRUS-RELATED DISTRIBUTIONS

A

is not treated as made on account

of hardship for purposes of this notice and, thus, any portion of the distribution is

permitted to be recontributed to an eligible retirement plan.

See section 4.C of this notice for rules relating to recontributions of

coronavirus-related distributions.

SECTION 2. GUIDANCE FOR EMPLOYER RETIREMENT PLANS MAKING

CORONAVIRUS-RELATED DISTRIBUTIONS

A. Coronavirus-related distributions generally are treated as satisfying certain

plan distribution restrictions

Under section 2202(a)(6) of the CARES Act, a distribution designated as a

coronavirus-related distribution by an employer retirement plan is treated as

meeting the distribution restrictions for qualified cash or deferred arrangements

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under § 401(k)(2)(B)(i), custodial accounts under § 403(b)(7)(A)(i), annuity

contracts under § 403(b)(11), governmental deferred compensation plans under

§ 457(d)(1)(A), and the Thrift Savings Plan under 5 U.S.C. 8433(h)(1). Thus, for

example, an employer may expand the distribution options under its plan to allow

an amount attributable to an elective, qualified nonelective, qualified matching, or

safe harbor contribution under a qualified cash or deferred arrangement to be

distributed as a coronavirus-related distribution even though it is distributed

before an otherwise permitted distributable event, such as severance from

employment, disability, or attainment of age 59½.

Except as described above, section 2202 of the CARES Act does not

change the rules for when plan distributions are permitted to be made from

employer retirement plans. Thus, for example, a qualified plan that is a pension

plan (such as a money purchase pension plan) is not permitted to make a

distribution before an otherwise permitted distributable event merely because the

distribution, if made, would qualify as a coronavirus-related distribution

does not

change the rules for when plan distributions are permitted to be made from

employer retirement plans. Thus, for example, a qualified plan that is a pension

plan (such as a money purchase pension plan) is not permitted to make a

distribution before an otherwise permitted distributable event merely because the

distribution, if made, would qualify as a coronavirus-related distribution. Further,

a pension plan is not permitted to make a distribution under a distribution form

that is not a qualified joint and survivor annuity without spousal consent merely

because the distribution, if made, could be treated as a coronavirus-related

distribution.

B. Direct rollover, § 402(f) notice, and 20% withholding requirements are not

applicable to coronavirus-related distributions

If a distribution is treated as a coronavirus-related distribution by an

employer retirement plan, the rules for eligible rollover distributions under

§§ 401(a)(31), 402(f), and 3405 are not applicable to the distribution. Thus, the

plan is not required to offer the qualified individual a direct rollover with respect to

the distribution. In addition, the plan administrator is not required to provide a

§ 402(f) notice. Finally, the plan administrator or payor of the coronavirus-related

distribution is not required to withhold an amount equal to 20% of the distribution,

as is usually required under § 3405(c)(1). However, a coronavirus-related

distribution is subject to the voluntary withholding requirements of § 3405(b) and

§ 35.3405-1T.

C. Treatment of distributions as coronavirus-related distributions

An employer is permitted to choose whether, and to what extent, to treat

distributions under its plans as coronavirus-related distributions (as well as

whether, and to what extent, to apply coronavirus-related plan loan rules

described in section 5 of this notice)

thholding requirements of § 3405(b) and

§ 35.3405-1T.

C. Treatment of distributions as coronavirus-related distributions

An employer is permitted to choose whether, and to what extent, to treat

distributions under its plans as coronavirus-related distributions (as well as

whether, and to what extent, to apply coronavirus-related plan loan rules

described in section 5 of this notice). Thus, for example, an employer may

choose to provide for coronavirus-related distributions but choose not to change

its plan loan provisions or loan repayment schedules. Further, the employer (or

plan administrator) is permitted to develop any reasonable procedures for

identifying which distributions are treated as coronavirus-related distributions

under its retirement plans. However, if, under an employer retirement plan, any

9

distribution of an amount subject to § 401(k)(2)(B)(i), 403(b)(7)(A)(i), 403(b)(11)

or 457(d)(1)(A) is treated as a coronavirus-related distribution, the plan must be

consistent in its treatment of similar distributions. Accordingly, the amount of the

distribution must be taken into account in determining the $100,000 limit on

coronavirus-related distributions made under all the retirement plans maintained

by the employer. Even if, under a plan, a distribution is not treated as

coronavirus-related, a qualified individual may treat a distribution that meets the

requirements of section 1.C of this notice as a coronavirus-related distribution on

the individual's federal income tax return.

D. Distribution limits on coronavirus-related distributions

The total amount of distributions treated by an employer as coronavirus-

related distributions under all its retirement plans with respect to a qualified

individual is not permitted to exceed $100,000. For purposes of this rule, the

term “employer” means the employer maintaining the plan and those employers

required to be aggregated with the employer under § 414(b), (c), (m), or (o)

tions

The total amount of distributions treated by an employer as coronavirus-

related distributions under all its retirement plans with respect to a qualified

individual is not permitted to exceed $100,000. For purposes of this rule, the

term “employer” means the employer maintaining the plan and those employers

required to be aggregated with the employer under § 414(b), (c), (m), or (o).

However, a plan will not fail to satisfy any requirement under the Code merely

because a qualified individual’s total coronavirus-related distributions exceed

$100,000 taking into account distributions from IRAs or other eligible retirement

plans maintained by unrelated employers.

E. Reliance on certifications

The administrator of an eligible retirement plan may rely on an individual’s

certification that the individual satisfies the conditions to be a qualified individual

in determining whether a distribution is a coronavirus-related distribution, unless

the administrator has actual knowledge to the contrary. The requirement that an

administrator not have “actual knowledge” that is contrary to an individual’s

certification does not mean that the administrator has an obligation to inquire into

whether an individual has satisfied the conditions described in section 1.B of this

notice to be a qualified individual. Rather, this requirement is limited to situations

in which the administrator already possesses sufficiently accurate information to

determine the veracity of a certification.

The following is an example of an acceptable certification:

Name: _______________________ (and other identifying

information requested by the employer for administrative purposes)

ice to be a qualified individual. Rather, this requirement is limited to situations

in which the administrator already possesses sufficiently accurate information to

determine the veracity of a certification.

The following is an example of an acceptable certification:

Name: _______________________ (and other identifying

information requested by the employer for administrative purposes).

I certify that I meet at least one of the following conditions: (1) I was

diagnosed with the virus SARS-CoV-2 or with coronavirus disease

2019 (referred to collectively as COVID-19) by a test approved by

the Centers for Disease Control and Prevention (including a test

authorized under the Federal Food, Drug, and Cosmetic Act);

(2) my spouse or my dependent was diagnosed with COVID-19 by

10

a test approved by the Centers for Disease Control and Prevention

(including a test authorized under the Federal Food, Drug, and

Cosmetic Act); or (3) I have experienced adverse financial

consequences because: (i) I, my spouse, or a member of my

household was quarantined, furloughed or laid off, or had work

hours reduced due to COVID-19; (ii) I, my spouse, or a member of

my household was unable to work due to lack of childcare due to

COVID-19; (iii) a business owned or operated by me, my spouse,

or a member of my household closed or reduced hours due to

COVID-19; or (iv) I, my spouse, or a member of my household had

a reduction in pay (or self-employment income) due to COVID-19 or

had a job offer rescinded or start date for a job delayed due to

COVID-19.

Signature: ______________________

Although an administrator may rely on an individual’s certification in

making and reporting a distribution, the individual is entitled to treat the

distribution as a coronavirus-related distribution for purposes of the individual’s

federal income tax return only if the individual actually meets the eligibility

requirements for that treatment under section 1 of this notice.

F

____________

Although an administrator may rely on an individual’s certification in

making and reporting a distribution, the individual is entitled to treat the

distribution as a coronavirus-related distribution for purposes of the individual’s

federal income tax return only if the individual actually meets the eligibility

requirements for that treatment under section 1 of this notice.

F. An employer retirement plan will be treated as operating in accordance with

its terms if certain requirements are satisfied

An employer retirement plan will not be treated as failing to operate in

accordance with its terms merely because the plan implements the provisions of

section 2202 of the CARES Act if the employer amends its plan by the dates

described in this paragraph. For employer retirement plans other than

governmental plans under § 414(d) of the Code, the date by which any plan

amendment to reflect the CARES Act is required to be made is the last day of the

first plan year beginning on or after January 1, 2022. For governmental plans

under § 414(d) of the Code, the date by which any plan amendment to reflect the

CARES Act is required to be made is the last day of the first plan year beginning

on or after January 1, 2024. Pursuant to the authority of the Secretary under

section 2202(c)(2) of the CARES Act, these dates may be extended in future

guidance.

SECTION 3. GUIDANCE FOR ELIGIBLE RETIREMENT PLANS MAKING OR

ACCEPTING RECONTRIBUTION OF CORONAVIRUS-RELATED

DISTRIBUTIONS

This section provides guidance for eligible retirement plans (that is,

employer retirement plans and IRAs) making, or accepting recontribution of,

coronavirus-related distributions.

11

A. Tax reporting on coronavirus-related distributions

An eligible retirement plan must report the payment of a coronavirus-

related distribution to a qualified individual on Form 1099-R, Distributions from

Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance

Contracts, etc

ans and IRAs) making, or accepting recontribution of,

coronavirus-related distributions.

11

A. Tax reporting on coronavirus-related distributions

An eligible retirement plan must report the payment of a coronavirus-

related distribution to a qualified individual on Form 1099-R, Distributions from

Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance

Contracts, etc. This reporting is required even if the qualified individual

recontributes the coronavirus-related distribution to the same eligible retirement

plan in the same year. If a payor is treating the payment as a coronavirus-related

distribution and no other appropriate code applies, the payor is permitted to use

distribution code 2 (early distribution, exception applies) in box 7 of Form 1099-R.

However, a payor also is permitted to use distribution code 1 (early distribution,

no known exception) in box 7 of Form 1099-R.

B. Accepting recontributions of coronavirus-related distributions

In general, a qualified individual who receives a coronavirus-related

distribution that is eligible for tax-free rollover treatment is permitted to

recontribute, at any time in a 3-year period, any portion of the distribution to an

eligible retirement plan that is permitted to accept eligible rollover contributions.

The relief in Q&A-14 of § 1.401(a)(31)-1 applies to an employer retirement plan

accepting recontributions of coronavirus-related distributions. In order to obtain

the relief described in Q&A-14 of § 1.401(a)(31)-1, a plan administrator accepting

the recontribution of a coronavirus-related distribution must reasonably conclude

that the recontribution is eligible for direct rollover treatment under section

2202(a)(3) of the CARES Act and that the recontribution is made in accordance

with the rules under section 4.C of this notice. In making this determination, the

rule in section 2.E of this notice applies

plan administrator accepting

the recontribution of a coronavirus-related distribution must reasonably conclude

that the recontribution is eligible for direct rollover treatment under section

2202(a)(3) of the CARES Act and that the recontribution is made in accordance

with the rules under section 4.C of this notice. In making this determination, the

rule in section 2.E of this notice applies. Thus, the administrator of an eligible

retirement plan may rely on an individual’s certification that the individual satisfies

the conditions to be a qualified individual in determining whether a distribution is

a coronavirus-related distribution, unless the administrator has actual knowledge

to the contrary.

In general, it is anticipated that eligible retirement plans will accept

recontributions 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 recontributions of coronavirus-related distributions.

SECTION 4. GUIDANCE FOR INDIVIDUALS RECEIVING CORONAVIRUS-

RELATED DISTRIBUTIONS UNDER SECTION 2202 OF THE CARES ACT

This section provides guidance for qualified individuals requesting and

receiving coronavirus-related distributions

t

any rollover contributions, the plan is not required to change its terms or

procedures to accept recontributions of coronavirus-related distributions.

SECTION 4. GUIDANCE FOR INDIVIDUALS RECEIVING CORONAVIRUS-

RELATED DISTRIBUTIONS UNDER SECTION 2202 OF THE CARES ACT

This section provides guidance for qualified individuals requesting and

receiving coronavirus-related distributions. A qualified individual receiving a

coronavirus-related distribution is entitled to the following favorable tax treatment

with respect to the distribution by reporting the distribution on the individual’s

12

federal income tax return for 2020 and on Form 8915-E, Qualified 2020 Disaster

Retirement Plan Distributions and Repayments (or if there is no federal income

tax return for 2020, by filing just Form 8915-E).1 First, the 10% additional tax

under § 72(t) (including the 25% additional tax under § 72(t)(6) for certain

distributions from SIMPLE IRAs) does not apply to any coronavirus-related

distribution. Second, a coronavirus-related distribution is permitted to be

included in income ratably over 3 years. Third, a qualified individual is permitted

to recontribute any portion of a coronavirus-related distribution that is eligible for

tax-free rollover treatment to an eligible retirement plan within the 3-year period

beginning on the day after the date on which the distribution was received, and

the recontribution will be treated as if it were paid in a trustee-to-trustee transfer

to an eligible retirement plan. See section 1.D of this notice for rules relating to

which coronavirus-related distributions are permitted to be recontributed.

Qualified individuals will use Form 8915-E to report any recontribution made

during the taxable year and to determine the amount of the coronavirus-related

distribution includible in income for the taxable year.

A

rustee transfer

to an eligible retirement plan. See section 1.D of this notice for rules relating to

which coronavirus-related distributions are permitted to be recontributed.

Qualified individuals will use Form 8915-E to report any recontribution made

during the taxable year and to determine the amount of the coronavirus-related

distribution includible in income for the taxable year.

A. Election to designate a distribution as a coronavirus-related distribution

A qualified individual is permitted to designate any distribution described in

section 1.C of this notice as a coronavirus-related distribution provided the total

amount treated by the individual as coronavirus-related distributions from all

eligible retirement plans does not exceed $100,000.

Example 1. If a qualified individual receives a distribution of $50,000 in

August of 2020 and a distribution of $75,000 in September of 2020 and both

distributions satisfy the definition of a coronavirus-related distribution, only

$100,000 of the $125,000 received by the qualified individual can be treated as a

coronavirus-related distribution. Thus, the individual can only treat $100,000 of

the August and September distributions as coronavirus-related distributions on

the individual’s 2020 federal income tax return. Assuming no § 72(t)(2) exception

applies, the remaining $25,000 of the distribution is an early distribution that is

subject to the 10% additional tax. This amount must be included on the

individual’s 2020 federal income tax return and will not be eligible for 3-year

recontribution to an eligible retirement plan.

Example 2. A section 401(k) plan distributes $35,000 to a qualified

individual on December 1, 2020. The qualified individual also receives a

distribution from the individual’s IRA on December 1, 2020, of $15,000. The

individual is permitted to treat both the $35,000 from the plan and the $15,000

from the IRA as coronavirus-related distributions on the individual’s 2020 federal

income tax return.

B

A section 401(k) plan distributes $35,000 to a qualified

individual on December 1, 2020. The qualified individual also receives a

distribution from the individual’s IRA on December 1, 2020, of $15,000. The

individual is permitted to treat both the $35,000 from the plan and the $15,000

from the IRA as coronavirus-related distributions on the individual’s 2020 federal

income tax return.

B. Income inclusion for coronavirus-related distributions

1 Form 8915-E is expected to be available before the end of 2020.

13

There are two methods for a qualified individual to include the taxable

portion of a coronavirus-related distribution in income. A qualified individual who

receives a coronavirus-related distribution is permitted to include the taxable

portion of the distribution in income ratably over a 3-year period that begins in the

year of the distribution. Alternatively, a qualified individual is permitted to elect

out of the 3-year ratable income inclusion and include the entire amount of the

taxable portion of the distribution in income in the year of the distribution. This

election cannot be made or changed after the timely filing of the individual’s

federal income tax return (including extensions) for the year of the distribution.

All coronavirus-related distributions received in a taxable year must be treated

consistently (either all distributions must be included in income over a 3-year

period or all distributions must be included in income in the current year).

Example. Taxpayer A receives a $30,000 distribution from his or her IRA

on October 1, 2020. Taxpayer A is a qualified individual and elects to treat the

distribution as a coronavirus-related distribution. Taxpayer A uses the 3-year

ratable income inclusion for the $30,000 distribution. Taxpayer A should include

$10,000 in income with respect to the coronavirus-related distribution on each of

the individual’s 2020, 2021, and 2022 federal income tax returns.

C

on October 1, 2020. Taxpayer A is a qualified individual and elects to treat the

distribution as a coronavirus-related distribution. Taxpayer A uses the 3-year

ratable income inclusion for the $30,000 distribution. Taxpayer A should include

$10,000 in income with respect to the coronavirus-related distribution on each of

the individual’s 2020, 2021, and 2022 federal income tax returns.

C. Tax treatment of recontributions of coronavirus-related distributions

If a coronavirus-related distribution is eligible for tax-free rollover treatment

(taking into account section 1.D of this notice), a qualified individual is permitted,

at any time in the 3-year period beginning the day after the date of a coronavirus-

related distribution, to recontribute any portion of the distribution, but not an

amount in excess of the amount of the distribution, to an eligible retirement plan.

A recontribution of a coronavirus-related distribution will not be treated as a

rollover contribution for purposes of the one-rollover-per-year limitation under

§ 408(d)(3)(B).

D. Tax treatment of recontributions of a coronavirus-related distribution made to

a taxpayer who uses the 1-year income inclusion method

If a qualified individual elects to include all coronavirus-related

distributions received in a year in gross income for that year and recontributes

any portion of the coronavirus-related distributions to an eligible retirement plan

at any time during the 3-year recontribution period, then the amount of the

recontribution will reduce the amount of the coronavirus-related distribution

included in gross income for the year of the distribution. The qualified individual

will report the amount of the recontribution on Form 8915-E (which will be filed

with the individual’s federal income tax return, if applicable)

rement plan

at any time during the 3-year recontribution period, then the amount of the

recontribution will reduce the amount of the coronavirus-related distribution

included in gross income for the year of the distribution. The qualified individual

will report the amount of the recontribution on Form 8915-E (which will be filed

with the individual’s federal income tax return, if applicable).

If a qualified individual includes a coronavirus-related distribution in gross

income in the year of the distribution and recontributes the distribution to an

eligible retirement plan after the timely filing of the individual’s federal income tax

14

return for the year of the distribution (that is, after the due date, including

extensions), the individual will need to file an amended federal income tax return

for the year of the distribution. The qualified individual will need to file a revised

Form 8915-E (with his or her amended federal income tax return) to report the

amount of the recontribution and should reduce his or her gross income by the

amount of the recontribution, but not in an amount exceeding the amount of the

coronavirus-related distribution.

Example 1. Taxpayer B receives a $45,000 distribution from a § 403(b)

plan on November 1, 2020. Taxpayer B is a qualified individual and treats the

distribution as a coronavirus-related distribution. Taxpayer B receives no other

coronavirus-related distribution from any eligible retirement plan. Taxpayer B

recontributes $45,000 to an IRA on March 31, 2021. Taxpayer B reports the

recontribution on Form 8915-E and files the 2020 federal income tax return on

April 10, 2021. For Taxpayer B, no portion of the coronavirus-related distribution

is includible as income for the 2020 tax year.

Example 2

receives no other

coronavirus-related distribution from any eligible retirement plan. Taxpayer B

recontributes $45,000 to an IRA on March 31, 2021. Taxpayer B reports the

recontribution on Form 8915-E and files the 2020 federal income tax return on

April 10, 2021. For Taxpayer B, no portion of the coronavirus-related distribution

is includible as income for the 2020 tax year.

Example 2. The facts are the same as in Example 1 of this section 4.D,

except that Taxpayer B timely requests an extension of time to file the 2020

federal income tax return and makes a recontribution on August 2, 2021, before

filing the 2020 federal income tax return. Taxpayer B files the 2020 federal

income tax return on August 10, 2021. As in Example 1, no portion of the

coronavirus-related distribution is includible in income for the 2020 tax year

because Taxpayer B made the recontribution before the timely filing of the 2020

federal income tax return.

Example 3. Taxpayer C receives a $15,000 distribution from a

governmental § 457(b) plan on March 30, 2020. Taxpayer C is a qualified

individual and treats the distribution as a coronavirus-related distribution.

Taxpayer C elects out of the 3-year ratable income inclusion on Form 8915-E

and includes the entire $15,000 in gross income for the 2020 taxable year. On

December 31, 2022, Taxpayer C recontributes $15,000 to the § 457(b) plan.

Taxpayer C will need to file an amended federal income tax return for the 2020

tax year to report the amount of the recontribution and reduce the gross income

by $15,000 with respect to the coronavirus-related distribution included on the

2020 original federal income tax return.

E. Tax treatment for year of recontribution of a coronavirus-related distribution

made to a taxpayer who uses the 3-year ratable income inclusion method

As explained above, a qualified individual is permitted to include a

coronavirus-related distribution in income ratably over a 3-year period

to the coronavirus-related distribution included on the

2020 original federal income tax return.

E. Tax treatment for year of recontribution of a coronavirus-related distribution

made to a taxpayer who uses the 3-year ratable income inclusion method

As explained above, a qualified individual is permitted to include a

coronavirus-related distribution in income ratably over a 3-year period. If a

qualified individual includes a coronavirus-related distribution ratably over a 3-

year period and the individual recontributes any portion of the coronavirus-related

distribution to an eligible retirement plan at any date before the timely filing of the

individual’s federal income tax return (that is, by the due date, including

15

extensions) for a tax year in the 3-year period, the amount of the recontribution

will reduce the ratable portion of the coronavirus-related distribution that is

includible in gross income for that tax year. See section 4.F of this notice for

recontributions that affect income inclusion in other tax years.

Example 1. Taxpayer D receives $75,000 from a section 401(k) plan on

December 1, 2020. Taxpayer D is a qualified individual and treats the $75,000

distribution as a coronavirus-related distribution. Taxpayer D uses the 3-year

ratable income inclusion method for the distribution. Taxpayer D makes one

recontribution of $25,000 to the section 401(k) plan on April 10, 2022. Taxpayer

D files the 2021 federal income tax return on April 15, 2022. Without the

recontribution, Taxpayer D should include $25,000 in income with respect to the

coronavirus-related distribution on each of D’s 2020, 2021, and 2022 federal

income tax returns

e inclusion method for the distribution. Taxpayer D makes one

recontribution of $25,000 to the section 401(k) plan on April 10, 2022. Taxpayer

D files the 2021 federal income tax return on April 15, 2022. Without the

recontribution, Taxpayer D should include $25,000 in income with respect to the

coronavirus-related distribution on each of D’s 2020, 2021, and 2022 federal

income tax returns. However, as a result of the recontribution to the section

401(k) plan, Taxpayer D should include $25,000 in income with respect to the

coronavirus-related distribution on the 2020 federal income tax return, $0 in

income with respect to the coronavirus-related distribution on the 2021 federal

income tax return, and $25,000 in income with respect to the coronavirus-related

distribution on the 2022 federal income tax return.

Example 2. The facts are the same as in Example 1 of this section 4.E,

except that Taxpayer D recontributes $25,000 to the section 401(k) plan on

August 10, 2022. Taxpayer D files the 2021 federal income tax return on April

15, 2022, and does not request an extension of time to file that federal income

tax return. As a result of the recontribution to the section 401(k) plan, Taxpayer

D should include $25,000 in income with respect to the coronavirus-related

distribution on the 2020 federal income tax return, $25,000 in income with

respect to the coronavirus-related distribution on the 2021 federal income tax

return, and $0 in income with respect to the coronavirus-related distribution on

the 2022 federal income tax return.

F

ibution to the section 401(k) plan, Taxpayer

D should include $25,000 in income with respect to the coronavirus-related

distribution on the 2020 federal income tax return, $25,000 in income with

respect to the coronavirus-related distribution on the 2021 federal income tax

return, and $0 in income with respect to the coronavirus-related distribution on

the 2022 federal income tax return.

F. Recontributions of a coronavirus-related distribution may be carried back or

forward when using the 3-year ratable income inclusion

If a qualified individual using the 3-year ratable income inclusion method

recontributes an amount of a coronavirus-related distribution for a tax year in the

3-year period that exceeds the amount that is otherwise includible in gross

income for that tax year, as described in section 4.E of this notice, the excess

amount of the recontribution is permitted to be carried forward to reduce the

amount of the coronavirus-related distribution that is includible in gross income in

the next tax year in the 3-year period. Alternatively, the qualified individual is

permitted to carry back the excess amount of the recontribution to a prior taxable

year or years in which the individual included income attributable to a

coronavirus-related distribution. The individual will need to file an amended

federal income tax return for the prior taxable year or years to report the amount

16

of the recontribution on Form 8915-E and reduce his or her gross income by the

excess amount of the recontribution.

Example. Taxpayer E receives a distribution of $90,000 from his or her

IRA on November 15, 2020. Taxpayer E is a qualified individual and treats the

distribution as a coronavirus-related distribution. Taxpayer E ratably includes the

$90,000 distribution in income over a 3-year period. Without any recontribution,

Taxpayer E will include $30,000 in income with respect to the coronavirus-related

distribution on each of the 2020, 2021, and 2022 federal income tax returns

November 15, 2020. Taxpayer E is a qualified individual and treats the

distribution as a coronavirus-related distribution. Taxpayer E ratably includes the

$90,000 distribution in income over a 3-year period. Without any recontribution,

Taxpayer E will include $30,000 in income with respect to the coronavirus-related

distribution on each of the 2020, 2021, and 2022 federal income tax returns.

Taxpayer E includes $30,000 in income with respect to the coronavirus-related

distribution on the 2020 federal income tax return. Taxpayer E then recontributes

$40,000 to an IRA on November 10, 2021 (and makes no other recontribution in

the 3-year period). Taxpayer E is permitted to do either of the following:

Option 1. Taxpayer E includes $0 in income with respect to the

coronavirus-related distribution on the 2021 federal income tax return. Taxpayer

E carries forward the excess recontribution of $10,000 to 2022 and includes

$20,000 in income with respect to the coronavirus-related distribution on E’s

2022 federal income tax return.

Option 2. Taxpayer E includes $0 in income with respect to the

coronavirus-related distribution on the 2021 tax return and $30,000 in income on

the 2022 federal income tax return. Taxpayer E also files an amended federal

income tax return for 2020 to reduce the amount included in income as a result of

the coronavirus-related distribution to $20,000 (that is, the $30,000 original

amount includible in income for 2020 minus the remaining $10,000 recontribution

that is not offset on either the 2021 or 2022 federal tax return).

G. Special rule for 3-year ratable income inclusion method for coronavirus-

related distributions

If a qualified individual dies before the full taxable amount of the

coronavirus-related distribution has been included in gross income, then the

remainder must be included in gross income for the taxable year that includes

the individual’s death.

H

r the 2021 or 2022 federal tax return).

G. Special rule for 3-year ratable income inclusion method for coronavirus-

related distributions

If a qualified individual dies before the full taxable amount of the

coronavirus-related distribution has been included in gross income, then the

remainder must be included in gross income for the taxable year that includes

the individual’s death.

H. Coronavirus-related distributions will not be treated as a change in

substantially equal periodic payments

In the case of an individual receiving substantially equal periodic

payments from an eligible retirement plan, the receipt of a coronavirus-related

distribution from that plan will not be treated as a change in substantially equal

payments as described in § 72(t)(4) merely because of the coronavirus-related

distribution.

17

SECTION 5. APPLICATION OF SECTION 2202 OF THE CARES ACT TO

PLAN LOANS

This section provides guidance regarding the application of section

2202(b) of the CARES Act to plan loans, including a safe harbor under which

suspensions of payments and extensions of loan terms will be treated as

satisfying section 2202(b)(2) of the CARES Act. As described in section 2.C of

this notice, an employer is permitted to choose whether, and to what extent, to

apply coronavirus-related plan loan rules described in this section (regardless of

how coronavirus-related distributions are treated).

A. Increase in the allowable loan amount

Special rules apply to a loan made from a qualified employer plan (as

defined in § 1.72(p)-1, Q&A-2) to a qualified individual on or after March 27, 2020

(the date of enactment of the CARES Act) and before September 23, 2020. For

these loans, section 2202(b)(1) of the CARES Act changes the limits under

§ 72(p)(2)(A) of the Code

s are treated).

A. Increase in the allowable loan amount

Special rules apply to a loan made from a qualified employer plan (as

defined in § 1.72(p)-1, Q&A-2) to a qualified individual on or after March 27, 2020

(the date of enactment of the CARES Act) and before September 23, 2020. For

these loans, section 2202(b)(1) of the CARES Act changes the limits under

§ 72(p)(2)(A) of the Code. In applying § 72(p) to a plan loan, the $50,000

aggregate limit in § 72(p)(2)(A)(i) is increased to $100,000 and the rule in

§ 72(p)(2)(A)(ii) limiting the aggregate amount of loans to 50 percent of the

employee’s vested accrued benefit is increased to 100 percent of the employee’s

vested accrued benefit.2

B. Suspension of payments and extension of term of loan

A special rule applies if a qualified individual has an outstanding loan from

a qualified employer plan on or after March 27, 2020. Section 2202(b)(2) of the

CARES Act provides that, for purposes of § 72(p), in the case of a qualified

individual with a loan from a qualified employer plan outstanding on or after

March 27, 2020, if the due date pursuant to § 72(p)(2)(B) or (C) for any

repayment with respect to the loan occurs during the period beginning on March

27, 2020, and ending on December 31, 2020, the due date shall be delayed for 1

year. In addition, any subsequent repayments of the loan shall be adjusted

appropriately to reflect the delay and any interest accruing during the delay, and

the period of delay must be disregarded in determining the 5-year period and the

term of the loan under § 72(p)(2)(B) and (C). The effect of section 2202(b)(2) of

the CARES Act is to permit a delay in certain plan loan repayments without

causing the loans to violate § 72(p)(2)(B) and (C). It does not, however, require

a delay in plan loan repayments in order to satisfy § 72(p)(2)(B) and (C)

the period of delay must be disregarded in determining the 5-year period and the

term of the loan under § 72(p)(2)(B) and (C). The effect of section 2202(b)(2) of

the CARES Act is to permit a delay in certain plan loan repayments without

causing the loans to violate § 72(p)(2)(B) and (C). It does not, however, require

a delay in plan loan repayments in order to satisfy § 72(p)(2)(B) and (C). Thus,

an employer is permitted to choose to allow this delay in loan repayments under

2 The Department of Labor has advised the Department of the Treasury and the IRS that it will

not treat any person as having violated the provisions of Title I of the Employee Retirement

Income Security Act (ERISA), including the adequate security and reasonably equivalent basis

requirements in ERISA section 408(b)(1) and 29 CFR 2550.408b-1, solely because the person

made a plan loan to a qualified individual during the period beginning on March 27, 2020, and

ending on September 22, 2020, in compliance with CARES Act section 2202(b)(1) and the

provisions of this notice. See EBSA Disaster Relief Notice 2020-01.

18

its plan with respect to qualified individuals, and, if it does, there will not be a

deemed distribution to those individuals under § 72(p) due to the delay. For

example, each repayment that becomes due during the period from March 27,

2020, through December 31, 2020, may be delayed for up to 1 year and then

reamortized (taking into account interest) over a period that is up to 1 year longer

than the original term of the loan. Each reamortized repayment may then be

added to other reamortized repayments and to non-reamortized repayments to

construct an overall loan reamortization schedule.

This notice provides a safe harbor for satisfying section 2202(b)(2) of the

CARES Act

to 1 year and then

reamortized (taking into account interest) over a period that is up to 1 year longer

than the original term of the loan. Each reamortized repayment may then be

added to other reamortized repayments and to non-reamortized repayments to

construct an overall loan reamortization schedule.

This notice provides a safe harbor for satisfying section 2202(b)(2) of the

CARES Act. Under this safe harbor, a qualified employer plan will be treated as

satisfying the requirements of § 72(p) pursuant to section 2202(b)(2) of the

CARES Act if a qualified individual’s obligation to repay a plan loan is suspended

under the plan for any period beginning not earlier than March 27, 2020, and

ending not later than December 31, 2020 (suspension period). The loan

repayments must resume after the end of the suspension period, and the term of

the loan may be extended by up to 1 year from the date the loan was originally

due to be repaid. If a qualified employer plan suspends loan repayments during

the suspension period, the suspension will not cause the loan to be deemed

distributed even if, due solely to the suspension, the term of the loan is extended

beyond 5 years. Interest accruing during the suspension period must be added

to the remaining principal of the loan. A plan satisfies these rules if the loan is

reamortized and repaid in substantially level installments over the remaining

period of the loan (that is, 5 years from the date of the loan, assuming that the

loan is not a principal residence loan, plus up to 1 year from the date the loan

was originally due to be repaid). If an employer, under its plan, chooses to

permit a suspension period that is less than the maximum suspension period

described above, the employer is permitted to extend the suspension period

subsequently, but not beyond December 31, 2020.

Example applying the safe harbor

he

loan is not a principal residence loan, plus up to 1 year from the date the loan

was originally due to be repaid). If an employer, under its plan, chooses to

permit a suspension period that is less than the maximum suspension period

described above, the employer is permitted to extend the suspension period

subsequently, but not beyond December 31, 2020.

Example applying the safe harbor. On April 1, 2020, a participant with a

nonforfeitable account balance of $40,000 borrowed $20,000 to be repaid in level

monthly installments of $368.33 each over 5 years, with the repayments to be

made by payroll withholding. The participant makes payments for 3 months

through June 30, 2020. The participant is a qualified individual (as described in

section 1.B of this notice). The participant’s employer takes action to suspend

payroll withholding repayments, for the period from July 1, 2020, through

December 31, 2020, for loans to qualified individuals that are outstanding on or

after March 27, 2020. Because the participant is a qualified individual, no further

repayments are made on the participant’s loan until January 1, 2021 (when the

balance is $19,477). At that time, repayments on the loan resume, with the

amount of each monthly installment reamortized to be $343.27 in order for the

loan to be repaid by March 31, 2026 (which is the date the loan originally would

have been fully repaid, plus 1 year).

19

The Department of the Treasury and the IRS recognize that there may be

additional reasonable, if more complex, ways to administer section 2202(b) of the

CARES Act. For example, in a plan with a suspension period beginning April 1,

2020, each repayment that becomes due during the suspension period may be

delayed to April 1, 2021 (the 1-year anniversary of the beginning of the

suspension period)

e Department of the Treasury and the IRS recognize that there may be

additional reasonable, if more complex, ways to administer section 2202(b) of the

CARES Act. For example, in a plan with a suspension period beginning April 1,

2020, each repayment that becomes due during the suspension period may be

delayed to April 1, 2021 (the 1-year anniversary of the beginning of the

suspension period). After originally scheduled repayments for January through

March of 2021 are made, the outstanding balance of the loan on April 1, 2021,

including the delayed repayments with interest, may be reamortized over a

period that is up to 1 year longer than the original term of the loan.

C. Reliance on certifications

The administrator of a qualified employer plan may rely on an individual’s

certification that the individual satisfies the conditions to be a qualified individual,

and therefore qualifies for the special treatment for loans under section 2202(b)

of the CARES Act, unless the administrator has actual knowledge to the contrary

under the standard described in section 2.E of this notice. See section 2.E of this

notice for an example of an acceptable certification.

SECTION 6. PERMITTED CANCELLATION OF DEFERRAL ELECTION

UNDER NONQUALIFIED DEFERRED COMPENSATION PLAN

Under § 1.409A-3(j)(4)(viii), a nonqualified deferred compensation plan

subject to § 409A may provide for a cancellation of a service provider's deferral

election, or such a cancellation may be made, due to an unforeseeable

emergency or a hardship distribution pursuant to § 1.401(k)-1(d)(3). If a service

provider receives a distribution from an eligible retirement plan that constitutes a

coronavirus-related distribution, that distribution will be considered a hardship

distribution pursuant to § 1.401(k)-1(d)(3) for purposes of § 1.409A-3(j)(4)(viii)

on, or such a cancellation may be made, due to an unforeseeable

emergency or a hardship distribution pursuant to § 1.401(k)-1(d)(3). If a service

provider receives a distribution from an eligible retirement plan that constitutes a

coronavirus-related distribution, that distribution will be considered a hardship

distribution pursuant to § 1.401(k)-1(d)(3) for purposes of § 1.409A-3(j)(4)(viii).

As a result, a nonqualified deferred compensation plan may provide for a

cancellation of the service provider's deferral election, or such a cancellation may

be made, due to a coronavirus-related distribution described in section 1.C of this

notice. The deferral election must be cancelled, not merely postponed or

otherwise delayed.

DRAFTING INFORMATION

The principal author of this notice is Jamie Dvoretzky of the Office of the

Associate Chief Counsel (Employee Benefits, Exempt Organizations, and

Employment Taxes). For further information regarding this notice, contact Ms.

Dvoretzky at (202) 317-4102 (not a toll-free number).