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CARES Act:

Your Questions, Answered

Last updated: August 10, 2020

In March, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and we invited readers to submit their questions about the legislation and its impacts. We’ve updated our answers as the IRS has provided additional guidance and clarification.

Most of your CARES Act questions were related to retirement accounts and required minimum distributions (RMDs), and we address those topics below. Please check our New Deadlines & Rules often or visit irs.gov  for updated information.

Your CARES Act Questions

The CARES Act provides more flexibility with required minimum distributions, withdrawals and loans from certain types of retirement accounts.

This includes coronavirus-related distributions (CRDs) from eligible retirement plans from January 1, 2020, to December 30, 2020, up to $100,000 from all plans and IRAs.

The CARES Act waived 2020 RMDs. The waiver applies to owners and beneficiaries of traditional IRAs and IRA-based accounts (SEPs, SARSEPs, SIMPLE IRAs), as well as profit-sharing, 401(k), 403(b) and 457(b) plans.

The waiver also applies to anyone who reached 70½ in 2019 and had until April 1, 2020, to take their first RMD—unless they had already taken their 2019 RMD during calendar year 2019. First-time 2019 RMDs taken during the 2019 calendar year can't be "undone" or rolled back in.

Waiving RMDs provides options for investors who don’t want to take money out of their accounts during market volatility. However, investors who do not have much taxable income may want to evaluate if it makes sense for them to take the distribution this year to take advantage of a lower tax bracket.

Yes. 2020 RMDs taken at any point during 2020 are eligible for an extension on the usual 60-day indirect rollover deadline and may be rolled back into the account until August 31, 2020. The distributions must be rolled back into the same IRA or plan from which they were originally taken.

Previously, the IRS had indicated that 2020 RMDs taken on or before January 31, 2020, couldn’t be rolled back, and that 2020 RMDs taken between February 1 and May 15 had to be rolled back by July 15, 2020. All 2020 RMD amounts are now eligible for the August 31 extension.

No. The latest guidance from the IRS states that 2020 RMD amounts are exempt from the one-rollover-per-12-months rule. The IRS had previously not addressed this issue, leaving many investors and firms to presume that partial RMDs counted toward the rollover limitation.

The expansion of this rule only applies to RMD amounts and not other distributions. If you previously did a 60-day rollover within the last 12 months, you are not eligible to roll amounts above your 2020 RMD back in.  

Additionally, if you elect to roll your 2020 RMD back in, any amount originally withheld for taxes at the time of the distribution must be made up out of pocket; otherwise, the withheld amount will remain as a taxable distribution for that calendar year.

2020 RMDs are also waived for beneficiaries. The year 2020 will also be disregarded for the purposes of applying the 5-year distribution rule. (If the original IRA owner passed away in a previous year, 2020 still will not count under the 5-year rule).  Additionally, any IRA beneficiary who previously had until December 31, 2020, to make a payout election is granted until December 31, 2021.

IRA beneficiaries who took a distribution in 2020 are allowed to complete an indirect rollover of only the RMD portion of the distribution, also until August 31, 2020, but it too must be repaid to the distributing IRA account. If the beneficiary took more than the RMD, the additional amount cannot be rolled back in.

As of June 30, non-RMD coronavirus-related distributions are now allowed from a beneficiary account. Only spouse beneficiaries can roll the funds back in (over the 3-calendar year period). Non-spouse beneficiaries are not eligible to roll CRD funds back in. 

The CARES Act allows for a “penalty-free” coronavirus-related distribution (CRD) through December 30, 2020, of up to $100,000 from traditional IRAs and IRA-based accounts (SEPs, SARSEPs, SIMPLE IRAs), as well as profit-sharing, 401(k), 403(b) and 457(b) plans.

The IRS has expanded the scope of eligibility to request a CRD from a retirement plan. It now includes hardships faced by the account owner’s spouse or primary family member (in a shared residence).

From IRS Notice 2020-50, a qualified individual for purposes of this notice is an individual who:

  • is diagnosed, or whose spouse or dependent is diagnosed, with the virus SARS-CoV-2 or the coronavirus disease 2019 (collectively, "COVID-19"); or
  • experiences adverse financial consequences as a result of the individual, the individual's spouse, or a member of the individual's household (that is, someone who shares the individual's principal residence):
    • 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;
    • closing or reducing hours of a business that they own or operate due to COVID-19;
    • having pay or self-employment income reduced due to COVID-19; or
    • having a job offer rescinded or start date for a job delayed due to COVID-19.

While the distribution is penalty-free, it will still be subject to normal income tax rules, as applicable. You may spread the taxes evenly over a three-year period, and you may repay the amount to an IRA or other eligible retirement plan that allows rollover contributions. You have to make the repayment within three years of the date you took the distribution.

The “should I?” part, however, depends on your situation. We help you explore your options in a related article. Read In Need Of Emergency Money? Where To Look. What To Watch Out For.

In Need of Emergency Money? Where to Look. What to Watch Out For.

The coronavirus is not just a medical crisis. It’s also a financial one for many. Find ways to free up or get money when you need it now.

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If you are an eligible individual as defined by the CARES Act, then you are eligible to have any loan repayments suspended that are due between March 27, 2020, and Dec. 31, 2020. These repayments can be suspended for up to one year. It is important to note that you should work with your plan administrator if you are looking to defer any loan repayments.


The CARES Act gives qualified plans the option to temporarily increase loan amounts available to eligible participants as defined by the CARES Act. Previously, the maximum loan amount was the lesser $50,000 or 50% of your vested balance. Now, the limit is the lesser of $100,000 or 100% of your vested balance.

As a reminder, your maximum loan availability will still be reduced by your highest outstanding loan balance for the last 12 months. Consult with your plan administrator if you are curious about whether your plan will allow this larger loan amount.

A recap of the CARES Act and other government support measures:

  • March 6 – Testing and Medical Support. The first coronavirus response package was an $8.3 billion measure to help fund testing and lower costs for medical treatments related to COVID-19, the disease caused by the coronavirus.
  • March 18 – Families First Act. The second aid package, the Families First Coronavirus Response Act, allocates an estimated $100 billion for extended paid sick leave and family leave for some U.S. workers impacted by COVID-19. It also expands unemployment benefits and provides additional virus testing resources.
  • March 21 – Tax Day Delay. The IRS postponed the federal tax payment and filing deadlines to July 15.
  • March 27 – CARES Act. This third, sweeping emergency aid package allocates approximately $2 trillion in emergency relief for individuals, businesses, industries, hospitals, etc.

CARES Act: Stimulus Payments

More than just stimulus, the CARES Act is meant as financial relief for individuals and businesses.

  • $1,200 payments for individuals, phased out for adjusted gross income levels above $75,000 and capped at $99,000 (based on 2018 or 2019 tax returns)
  • $2,400 for couples, phased out for joint adjusted gross income above $150,000 and capped at $198,000 (based on 2018 or 2019 tax returns)
  • Payments of $500 per child
  • Expanded unemployment benefits, including $600 per week for up to four months
  • Approximately $349 billion in loans for small businesses, $500 billion in loans for industries and $130 billion in assistance for hospitals

What’s Next?

The uncertainty around COVID-19 may drive continued market turbulence in the coming weeks and months. This may be a good time to review whether your long-term investment strategy is aligned with your time horizon and your willingness to accept short-term volatility.

Want to discuss your options? Let’s talk.

Let’s Do This, Together

Whether you’re worried about market volatility, risk or your own situation, let’s talk through it together.

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This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.

This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.

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