News & Insights

In March 2020, Congress passed, and the President signed into law, both the Relief, and Economic Security Act, H.R. 748 (the “CARES Act”) and the Families First Coronavirus Response Act, H.R. 6201 (the “FFCRA”).  The two laws were designed to help American individuals and businesses weather the current COVID-19 outbreak by providing paid leave for many employees dealing with the virus; increased unemployment benefits; forgivable loans for small businesses; and various tax credits and deferrals and direct payments to individuals.

As employers and employees navigate these new laws, they should be mindful of the impact the laws have on benefit plans and retirement accounts.

The CARES Act’s Impact on Retirement Plans and IRAs 

The CARES Act has numerous provisions which relax certain rules regarding distributions from retirement plans and IRAs.  Among the relaxation of these rules are:

  1. RMDs Waived.

Required Minimum Distribution (“RMD”) requirements are waived for 2020 for most retirement plans and IRAs. In addition, if an RMD was to start in 2020 because of a required beginning date for a taxpayer who turned 70 ½ in 2019, that RMD is waived as well. 

  1. Penalty Waivers on Distributions up to $100,000.

Premature distributions from an IRA/retirement plan (prior to age 59 ½) will no longer be subject to a penalty of 10% if the distribution does not exceed $100,000 and is coronavirus-related. A “coronavirus-related” distribution is a distribution made during 2020 to an individual:

  • Who is diagnosed with the virus SRS-COV-2 or COVID-19 by a test approved by the CDC, or
  • Whose spouse or dependent is diagnosed with SRS-COV-2 or COVID-19, or
  • Who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to the virus, being unable to work due to lack of child care due to such virus, closing or reducing hours of a business owned or operated by an individual due to the virus, or other factors as determined by the Secretary of the Treasury.

Such premature distribution will be included in income (for tax purposes) but the bill allows individuals to take the distribution into income over a three-year period starting in 2020.  If the taxpayer does not want to pay income tax on the distribution, the distribution can be repaid into the IRA/Retirement plan within three (3) years of the distribution in order to avoid such taxes.  Finally, a plan sponsor can rely on employee certification that a distribution meets these requirements.

  1. Retirement Plan Loan Amounts Increased.

For 180 days from the date of the CARES Act’s enactment, a plan participant can borrow $100,000 from his/her retirement account (up from a previous limit of $50,000) not to exceed the total amount in the participant account (up from a previous limit on fifty percent (50%) of the total amount).

  1. Plan Loan Repayment Delayed.

Repayment amounts for an outstanding loan take by a qualified person from a retirement plan will be delayed for one (1) year.  This applies to repayment amounts which come due during the time period from March 27, 2020 until December 31, 2020 for individuals described above under “coronavirus related.”

  1. Funding Requirement Delayed for Defined Benefit Plans.

Finally, the minimum funding requirements for defined benefit plans are delayed until January 1, 2021.

Implications of the FFCRA that Benefits Plan Sponsors Should Consider 

With the paid leave provision of the FFCRA going into effect on April 1, 2020, there are several issues of which businesses need to be mindful as it relates to their benefits plans:

  1. Providing Benefits During Emergency FMLA Leave and Paid Sick Leave.

As explained previously, the FFCRA expands paid sick leave and paid Family and Medical Leave Act (“FMLA”) leave for employees who experience certain COVID-19 related circumstances who are employed by business with fewer than 500 employees.  Under the traditional FMLA regime, an employee on FMLA leave is entitled to continue receiving group health plan benefits on the same terms and conditions as if the employee had continued to work.  Because the FFCRA does not change these requirements, health care benefits are still going to have to be offered to employees during this paid time off.

In addition, small employers with less than 50 employees may now have to comply with the new paid leave laws under FMLA and extend these health care benefits.  While the Department of Labor has issued some guidance on how to seek a hardship exemption for employers with less than 50 employees, many such employers will still be subject to the new law.  Small employers may be in for a shock at just how complicated FMLA leave compliance can be (even if those employers only have to comply with the new paid leave policies). Employers will want to get familiar with the new FMLA rules and be sure their health care plans accurately describe how benefits are provided during all leaves of absences (paid or otherwise).

  1. Group Health Plans May Need to be Updated.

The FFCRA also requires most groups health plans to provide COVID-19 related services at no cost and without pre-authorization or other plan approval processes.  In general, these covered services are testing for COVID-19 and health care provider visits (in person or telehealth), including emergency room and urgent care visits if such visits result in in an order for a diagnostic test.  Such coverage is limited to items or services related to testing or related to determining if the person needed the diagnostic services.  Employers will want to be sure their health care documents (such as WRAP, summary plan documents, etc.) are updated and that their third party administrators are managing the expanded coverage correctly.

  1. Tax Credits

As previously discussed, employers who qualify fall within the FFCRA’s requirements are eligible for payroll tax credits to offset the costs of the new paid sick leave and FMLA leave policies.  Those employers will be able to increase those tax credits for qualified health care plan expenses which will include amounts incurred providing and maintaining a health care plan for employees under the new leave policies.  The Treasury Department will be providing additional guidance on those additional credit amounts.

Given the many different issues that benefit plan sponsors should be mindful of when navigating these new laws, it is important for employers to be clear about how the new laws impact their plans.  If you have questions about how the recent COVID-19 legislation impacts your employee benefit plans, contact Erin Bailey at or (336) 271-5264. Please also follow our Twitter account @TuggleDuggins at for continuing, up-to-date information related to navigating the law during the COVID-19 outbreak.

© 2020 Tuggle Duggins P.A. All Rights Reserved. The purpose of this bulletin is to provide a general summary of significant legal developments. It is not intended to constitute legal advice or a recommended course of action in any given situation. It is not intended to be, and should not be, relied upon by the recipient in making decisions of a legal nature. Moreover, information contained in this bulletin may have changed subsequent to its publication. This bulletin does not create an attorney-client relationship between Tuggle Duggins P.A. and the recipient. Therefore, please consult legal counsel before making any decisions or taking any action concerning the issues discussed herein.



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