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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

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