March 2020 Letter

THE CORONAVIRUS AID, RELIEF, AND ECONOMIC SECURITY ACT (H.R. 748), What 401K and IRA owners should know.

Special Rules For Use of Retirement Funds (Penalty Relief for Immediate Use of Retirement Funds) (CARES Act Section 2202)

The CARES Act waives the 10% early withdrawal penalty under IRC Section 72(t)--which generally applies to withdrawals made before the age of 59 ½--for distributions made up to $100,000 from qualified retirement accounts (e.g., a 401k) for coronavirus-related purposes made on or after January 1, 2020, and before December 31, 2020. Income attributable to such distributions, however, will be subject to tax, and the tax is to be paid over three years. The taxpayer may also recontribute the funds to an eligible retirement plan within three years without regard to that year’s cap on contributions.

A coronavirus-related distribution is a one made to an individual: (1) who is diagnosed with COVID-19; (2) whose spouse or dependent is diagnosed with COVID-19; or (3) who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to COVID-19, or other factors as determined by the U.S. Treasury Secretary.

3. Temporary Waiver of Required Minimum Distribution Rules For Certain Retirement Plans and Accounts (CARES Act Section 2203)

The CARES Act also waives the required minimum distribution rules for certain defined contribution plans and IRAs for calendar year 2020. This provision provides relief to individuals who would otherwise be required to withdraw funds from such retirement accounts during the economic slowdown due to COVID-19.

Sincerely,

Elliot Weissmark, CFP®, CPFA
Senior Vice President, Investments

Any opinions are those of the author and not necessarily those of Raymond James. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Investing involves risk and you may incur a profit or loss regardless of strategy selected. The forgoing is not a recommendation to buy or sell any individual security or any combination of securities. Past performance may not be indicative of future results. Be sure to contact a qualified professional regarding your particular situation before making any investment or withdrawal decision.