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Under the CARES Act, is a distribution before age 59½ from a retirement plan permitted without penalty?

Posted by Bonita Hatchett-Bodle

Apr 9, 2020 5:03:35 PM

Yes. The CARES Act waives the 10% early withdrawal penalty under Section 72(t) of the Code on distributions before age 59½ from tax-qualified retirement plans and individual retirement accounts, as long as the distribution does not exceed $100,000. In order to qualify for the waiver, the participant must fall within one of the following categories:

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Topics: Coronavirus, early withdrawal penalty, retirement distribution

Are coronavirus distributions from a retirement plan subject to federal income tax?

Posted by Bonita Hatchett-Bodle

Apr 9, 2020 5:02:05 PM

Coronavirus distributions are exempt from the 20% mandatory withholding requirement for retirement plan distributions. Additionally, participants can pay the tax on the distribution ratably over a three-year period unless the participant elects otherwise.

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Topics: Coronavirus, early withdrawal penalty, retirement distribution

Can a coronavirus distribution be repaid in order to avoid the tax liability?

Posted by Bonita Hatchett-Bodle

Apr 9, 2020 5:00:36 PM

Yes. The participant’s distribution may be re-contributed to the distributing retirement plan, or to another plan, within three years after the date the distribution is received, without regard to any plan limit on contributions. If the individual does not re-contribute, the distribution within that time period, taxation on the distribution may be spread over a three-year period.

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Topics: Coronavirus, early withdrawal penalty, retirement distribution

What are the new CARES Act retirement plan loan rules?

Posted by Bonita Hatchett-Bodle

Apr 9, 2020 4:58:29 PM

The CARES Act increased the amount that participants are able to borrow from their individual account under defined contribution plans, like 401(k) plans. Historically, the rules limited loans to the lesser of $50,000 and 50% of the participant’s vested account balance.

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Topics: Coronavirus, retirement plan loans

Are paid sick leave and expanded family and medical leave requirements retroactive?

Posted by Bonita Hatchett-Bodle

Apr 8, 2020 3:24:19 PM

No. The paid leave provisions of the Families First Coronavirus Response Act (FFCRA) only apply to leaves taken on or after April 1, 2020.

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Topics: Coronavirus, paid leave, FFCRA

Does overtime pay have to be included when determining paid leave?

Posted by Bonita Hatchett-Bodle

Apr 8, 2020 12:21:31 PM

Yes. The Families First Coronavirus Response Act (FFCRA) requires you to pay an employee for hours the employee would have been normally scheduled to work even if that is more than 40 hours in a week. For example, an employee who is scheduled to work 50 hours a week may take 50 hours of paid sick leave in the first week and 30 hours of paid sick leave in the second week for the total of 80 hours of paid leave.

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Topics: Coronavirus, COVID-19, Families First Coronavirus Response Act

Can an employer deny an employee paid sick leave if the employee was on sick leave due to illness?

Posted by Bonita Hatchett-Bodle

Apr 8, 2020 10:24:02 AM

No. The EPSLA imposes a new leave requirement on employers that is effective beginning on April 1, 2020. If an employee was recently out on FMLA leave due to illness and now has COVID-19, the employer is required to provide paid sick leave if the employee requests the leave on or after April 1, 2020.

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Topics: Coronavirus, COVID-19, EFML, sick leave

In order to receive paid EFMLA leave, the employee must be employed for 30 days. How is this determination made?

Posted by Bonita Hatchett-Bodle

Apr 8, 2020 10:20:45 AM

For purposes of the Emergency Family and Medical Leave Expansion Act (EFMLA), an employee is considered to have been employed for at least 30 calendar days if the employee was on the employer’s payroll for at least 30 days immediately prior to the day the leave would begin. For example, if an employee requested leave on April 1, 2020, the employee would need to have been on the employer’s payroll as of March 2, 2020. If an employee had been working for an employer as a temporary employee, and the employee is subsequently hired on a full-time basis, the days of temporary employment count toward the 30-day eligibility period.

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Topics: Coronavirus, COVID-19, EFML

Who qualifies as a son or daughter for purposes of EFMLA leave?

Posted by Bonita Hatchett-Bodle

Apr 8, 2020 10:18:52 AM

Under the Emergency Family and Medical Leave Expansion Act (EFMLA), a “son or daughter” is your own minor child under the age of eighteen, which includes your biological, adopted, or foster child, your stepchild, a legal ward, or a child for whom you are standing in loco parentis—someone with day-to-day responsibilities to care for or financially support a child. A “son or daughter” also includes an adult son or daughter (i.e., one who is eighteen years of age or older), who (1) has a mental or physical disability, and (2) is incapable of self-care because of that disability.

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Topics: Coronavirus, COVID-19, EFML

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