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The CARES ACT Includes Coronavirus-Related Relief in Retirement Accounts

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The Internal Revenue Code generally imposes a 10% early withdrawal penalty on distributions from a retirement plan taken prior to a participant being at least 59½ years old or qualifying for another exception.

The CARES Act, however, waives the 10% penalty for “coronavirus-related” distributions. A coronavirus-related distribution is one that is made to an individual:

  • Whose spouse or dependent is diagnosed with such virus;
  • Who experiences adverse financial consequences as a result of being quarantined, being furloughed, getting laid off, having work hours reduced, being unable to work due to lack of child care, having a business closing, or experiencing reduced hours.

Also of note, a coronavirus-related distribution may be included in income over a three- year period.

Listen to Denise Appleby of Appleby Retirement Consulting discuss this provision of the CARES Act in this Retirement Daily podcast

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