ProSpeak

Stimulus package – What it Means for You
May 6, 2020
Seth Whicker, SYM Financial Advisors
ProSpeak

Amid this new age of social distancing, Congress came together to create a historic $2 trillion COVID-19 stimulus package to combat a pandemic that has effectively shut down the world economy. The Coronavirus Aid, Relief and Economic Security Act (CARES Act) aims to mitigate the personal, financial, and health losses caused by the global pandemic. 

Some key points may be of particular interest to individuals:

  • The package provided funds directly to taxpayers in the form of a one-time stimulus payment in April. Individuals received $1,200 each ($2,400 for married couples). An additional $500 was given for each qualified child, up to four children. 
  1. Retirement account hardship distributions may be made to eligible participants who meet specific criteria (also, the plan sponsor may choose to not allow withdrawals). While taking withdrawals is not an ideal choice, this exception does provide for flexibility in managing cash flow for the short term. It is critical to seek advice from an advisor before withdrawing funds from a qualified plan. Eligibility includes:
    • If the participant, the participant’s spouse or a dependent is diagnosed with the coronavirus.
    • Participants experiencing adverse financial circumstances related to the coronavirus, such as being quarantined, furloughed, laid off work or working reduced hours. 
    • Participants who owned a business that closed or operated under reduced hours due to the coronavirus. 
    • Distributions will be limited to a maximum of $100,000, must be made in 2020 and would be exempt from the early withdrawal penalty. 
  • Retirement plan loan limits may be increased and current loan payments suspended.
    • A plan may allow eligible participants to take a loan up to the lesser of $100,000 or 100 percent of the participants vested account balance.
    •  A plan sponsor can suspend loan payments for a period of twelve months. The suspension period would be added to the original loan term. 
 

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