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Understanding the CARES Act: Retirement Plan Loans

The House of Representatives today passed—by an expedited procedure—the Coronavirus Aid, Relief and Economic Security (CARES) Act, which was passed by the Senate late on Wednesday, March 25. This afternoon, President Trump signed the legislation into law.

On Wednesday night, March 25, shortly before midnight, Eastern Time, the U.S. Senate cleared lingering objections of both Democrat and Republican members and unanimously passed H.R. 748, the Coronavirus Aid, Relief and Economic Security, or CARES Act. The legislation has many elements intended to aid businesses and workers, and assist the U.S. health care system in working through the coronavirus (COVID-19) pandemic. It also contains multiple provisions that would affect retirement savings arrangements, health savings accounts (HSAs), Archer medical savings accounts (MSAs), health reimbursement arrangements (HRAs), and flexible spending arrangements (FSAs).

Senate Republican coronavirus response legislation—the Coronavirus Aid, Relief and Economic Security, or CARES Act—has been proposed in order to assist Americans affected by the COVID-19 pandemic. The proposal has multiple provisions that would affect retirement savings arrangements and health savings accounts (HSAs). This legislative proposal is being monitored closely, and further developments will be shared as warranted.

The retirement industry eagerly received the IRS guidance on applying provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act with the issuance of Notice 2020-50 on June 19. It has provided important details on compliance with this legislation—which offers financial and tax relief to millions of Americans affected by the coronavirus (COVID-19) pandemic.

The Internal Revenue Service (IRS) today issued Notice 2020-42, in which the IRS provides temporary relief from the physical presence requirements for certain elections that are made by participants and beneficiaries in qualified retirement plans and other tax-favored retirement arrangements. This includes signatures of those making an election that ordinarily would need to be witnessed in the physical presence of a plan representative or notary public, including spousal consent and certain forms of distribution from retirement plans.

On Wednesday night, the U.S. Senate approved by voice vote H.R. 7010, the House-passed Paycheck Protection Program Flexibility Act of 2020. The legislation extends elements of and makes certain other adjustments to the Paycheck Protection Program (PPP). This Small Business Administration lending program was created by the Coronavirus Aid, Relief, and Economic Security Act, to help small employers meet payroll and other expenses as businesses and the nation deal with the economic effects of the novel coronavirus pandemic.

The U.S. House of Representatives passed by a 417-1 margin on Thursday, May 28, the Paycheck Protection Program Flexibility Act of 2020. This legislation would modify certain core terms of this Small Business Administration (SBA) emergency lending program. The Paycheck Protection Program (PPP) was created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law on March 27, 2020. Under the program, qualifying small businesses may apply for loans from the SBA to retain employees on their payrolls, and—especially attractive to business owners—the loans are forgiven if certain conditions are met.

On May 28, 2020, the IRS issued limited additional relief that extends deadlines for certain time-sensitive actions related to tax-advantaged savings arrangements. Most awaited was an extension for providing information returns for IRAs, health savings accounts (HSAs), Archer medical savings accounts (MSAs), and Coverdell education savings accounts (ESAs). These information returns are Form 5498, IRA Contribution Information, Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information, and Form 5498- ESA, Coverdell ESA Contribution Information.

The House of Representatives late Friday passed H.R. 6800, the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, providing additional aid to many who are adversely affected by the novel coronavirus (COVID-19) pandemic. The bill also contained non-COVID-19-related provisions considered likely to prove controversial in the Senate.