CARES Act Benefits to Savings Accounts
On March 27, 2020, the CARES Act was signed in to law, providing much-needed relief for Americans facing financial hardships.
While there are numerous loan programs for small businesses, stimulus checks for eligible individuals, and extended protections for those currently unable to work, many Americans aren’t yet aware of the immense benefits being offered around their retirement savings and health savings accounts.
At Lincoln Savings Bank, our priority is lifting up our customers during this time of need and equipping them with the best tools and resources to help keep them and their families safe. Today we are proud to share the contingencies made available to those with retirement and health savings, and how you can utilize them during this turbulent time.
The following provisions are now available for those with an IRA, Roth, SEP, SIMPLE, 401(k), or 403(b).
New Coronavirus Related Distributions (CRDs)
In order to help Americans gain better access to their savings, the CARES act allows an individual to withdraw an aggregate amount of $100,000 from their combined retirement accounts. These funds will NOT be subject to the 10 percent early withdrawal penalty by the IRS. This option is available to those who have been diagnosed with COVID-19 as well as those who can show a negative financial effect due to COVID-19 due to job loss, work furlough, reduced income, or other factors as determined by the Treasury Secretary.
Custodians or trustees of the retirement account will continue to code the distributions as either normal or early, and report to the IRS as such. Justification of the CRD and its exemption from the early withdrawal penalty falls on the account owner’s 2020 Tax Return.
Individuals with an IRA or eligible retirement plan are permitted to repay their CRDs over the course of three years from the day after the CRD is created. Unless elected otherwise, the IRS will tax these distributions ratably over a three-year period.
Required Minimum Distributions (RMD) are Waived for 2020
For both account owners, and its beneficiaries, the RMDs regularly required for 2020 are effectively waived. Additionally, anyone who turned 70 ½ during the year 2019, and has not yet taken their initial RMD is not required to take it within the year 2020. This further applies to those who have already taken their RMD for the year 2020. For those in this circumstance, the option of redepositing those funds is available for 60 days after its withdrawal. This option may be open for those who withdrew funds earlier in the year; however, further guidance is needed.
For any purposes of RMD toward a beneficiary that involve a five-year period for distributions, 2020 will not count as one of the years, and is to be disregarded. One year will be added to the remaining period.
Health Savings Account Adjustments
According to these new guidelines, there are additional over-the-counter products and medications that are not required to be a prescription in order to qualify as a medical expense through an HSA. Specifically, the CARE Act allows for menstrual care products to be purchased through an HSA.
The deadline for 2019 Carryback Contributions is delayed. If you have not made your 2019 IRA/Roth/SEP contribution, you have until July 15, 2020 to make that contribution.
At Lincoln Savings Bank, our team is dedicated to serving you and your family. If you have any questions about these changes or would like to speak with someone about adjusting your personal finances, we’re just a call away. Please fill out our contact form contact us or call us at (800) 588-7551.
Lincoln Savings Bank. Member FDIC.
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