The latest version of the Coronavirus Aid, Relief, and Economic Security, or CARES Act, includes a temporary suspension of Required Minimum Distributions from defined contribution plans and IRAs.
Distributions required in calendar year 2020 would not have to be taken. The provision was added over the weekend after a consortium of retirement and other trade organizations requested, among other asks, that retirement accounts be given time to recover.
The bill also includes its original hardship “coronavirus” distribution, which doubles the exiting limit to $100,000. The 10 percent penalty on hardship distributions would be waived, and savers would have three years to pay back the money.
And it also doubles the standard retirement plan loan limit to $100,000. Sponsors would be able to amend plan documents upon passage of the bill, and sponsors that don’t have hardship or loan provisions would be able to add them.
On Monday, the CARES Act failed its second vote in the Senate, where 60 votes will be needed for passage. Democrats are pushing for more money to be channeled to individuals. Under the proposed bill, individuals making less than $75,000 would receive $1,200, and couples making less than $150,000 would receive $2,400. Another $500 would be issued per child.
Democrats reportedly want the $1,200 raised to $1,500.
While the retirement provisions in the bill would certainly be welcomed by many retirement savers, industry is pressing for wider regulatory relief for plan sponsors, particularly for defined benefit plans. Dropping interest rates are increasing the cost of future liabilities, and hemorrhaging equity markets are decimating funded ratios.
That will increase minimum contributions to plans as companies scramble to preserve cash and payrolls.
Industry is asking for premiums to the PBGC to be temporarily suspended, and the interest rates used to determine future liabilities to be set at pre-coronavirus rates, among other measures.
PBGC’s single-employer insurance program is running an $8.7 billion surplus.