Yes, a plan can permit participants to suspend loan payments temporarily during unpaid leaves of absence. Can participants stop making 401(k) loan payments? The amount available for hardship withdrawals for those qualified individuals affected by the COVID-19 pandemic has been increased to $100,000 per the CARES Act during 2020 there will be no 20% mandatory withholding tax on such distributions or 50% of account balance limitation and taxes can be spread over a 3-year period or avoided by depositing the equivalent amount into another plan or IRA over the 3-year period. In the SECURE Act, the IRS recently added federally-declared disasters to the list of “safe harbors.” If President Trump makes such a declaration about the COVID-19 pandemic, it would seem that hardship distributions could be made on that basis. ![]() If, the plan uses a facts and circumstances standard in lieu of the “safe harbors,” then unpaid leave may qualify. (Then again, payment for medical expenses incurred in connection with treating COVID-19 will qualify under the “safe harbor” standard for medical expenses). If the plan includes the usual “safe harbors” from the ERISA regulations, it may be that a period of prolonged unpaid leave will not be considered to constitute a covered hardship. The answer may differ based upon the standard that the 401(k) plan uses in determining whether an employee is eligible for such a withdrawal from his/her account. Can an employee take a hardship withdrawal? This client alert addresses some of these issues. In addition, employers and their HR departments are likely to receive inquiries from concerned employees relating to these retirement plans. See Create and publish posts to learn more.During these times of economic uncertainty, there are several measures that an employer may wish to entertain in order to limit its potential financial exposure with respect to the retirement plans it sponsors.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |