The six-month period that employer-sponsored retirement plans are allowed to increase the loan amount that eligible plan participants may borrow from their account expires September 23, 2020. Thus, if you decide that borrowing from your retirement account may be the right move for you during this pandemic, you have through September 22, 2020 to do so at the higher amount. In summary:
The CARES Act provides that eligible participants in tax-qualified plans such as 401(k)s and 403(b)s can borrow an amount up to $100,000 or 100% of their vested account (whichever is less) on or after March 27, 2020 and before September 23, 2020. Under normal circumstances, the amount plan participants are allowed to borrow is $50,000 or 50% of their vested account balance. Eligible participants are those who:
• have tested positive and been diagnosed with COVID-19;
• have a dependent or spouse who has tested positive and been diagnosed with COVID-19; or
• those experiencing financial hardship due to them, their spouse or a member of their household being subject to one or more of the following:
– Being quarantined, furloughed or laid off or having reduced work hours.
– Being unable to work due to lack of childcare.
– Closing or reducing hours of a business that they own or operate.
– Having pay or self-employment income reduced.
– Having a job offer rescinded or start date for a job delayed.
As a reminder, the CARES Act also provides that loan repayments (both new and existing) due between March 27, 2020 and December 31, 2020, can be delayed for up to a year. The loan would need to be re-amortized in 2021 for the remaining repayments similar to how a loan may be re-amortized following a participant’s leave of absence.