Back to Blog

April 29, 2020 CARES Act and Retirement Plans

What is the CARES Act, and how does it affect my plan?

Effective 03/27/2020 President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act provides Americans impacted by COVID-19 with some financial relief by easing restrictions around distributions and loans from their retirement plan.  In order to take advantage of this relief, the Plan must be amended to include the new provisions. However, the Plan can make the new provisions available immediately and delay executing the amendment until the end of first Plan Year after January 1, 2022. Please note: plans are not required to offer these new provisions.

NEW CoronaVirus-Related Distribution (CRD) Option:  Under this new distribution option, qualified participants may withdraw up to $100,000 from their retirement plan during the 2020 calendar year. This withdrawal option is available to all participants regardless of age and employment status.  Significantly, these withdrawals are not subject to the 10% early distribution penalty and the income tax associated with the distribution may be paid ratably over a three-year period.  Participants are also allowed to repay their distribution back into their retirement plans for a 3-year period.  To qualify for the distribution, the participant must:

  • Have been diagnosed with COVID 19 virus; or
  • Have a spouse or dependent diagnosed with COVID 19 virus; or
  • Have experienced adverse financial consequences as a result of being quarantined, 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 the virus, or a business closure or reduction in open hours due to the virus.
  • IMPORTANT: Participants are allowed to self-certify their qualified status, eliminating the need for the employer to substantiate the request.

MODIFIED Loan Options:  The CARES Act provides for two important modifications to the Plan’s existing loan policy for “qualified participants”.  The qualification rules are the same as noted above. First, it temporarily increases the maximum loan from a participant’s retirement plan to the lesser of $100,000 or 100%* of their vested account balance. These amounts are an increase from the current limit of $50,000 and 50%, respectively.  Second, any loan payment on a new or existing loan due between April 1 and December 31, 2020 can be delayed up to a year without risk of default, although interest will accrue during the period.  When computing the 5-year maximum loan duration, the grace period provided can be ignored, effectively allowing loans to extend for more than 5 years past the origination date.

*certain plans may cap the withdrawable loan balance at less than 100%


Required Minimum Distributions (RMDs): The CARES Act permits the waiver of these distributions due in 2020.  This includes a 1st year – 2019 RMD due by April 1, 2020.  Since some participants may have already taken their distribution in 2020 prior to the enactment of the CARES Act, they are allowed to roll that distribution back into a qualified plan or IRA that accepts rollovers, provided the distribution occurred February 1st or later whereby the 60 day rollover period falls within April 1, 2020 to July 15, 2020.  A participant does not have to meet the criteria above to take advantage of this waiver.

Have a question? We’d love to hear from you! Call us at 904.273.5220 or send us an email at


How is BlueStar handling CARES Act Changes?

In order to streamline operations with these new allowable provisions, BlueStar has chosen to adopt these changes as a default. Plan Administrators wishing to opt out of any of the features are presented the option to do so.

BlueStar’s proprietary administration systems have allowed us to rapidly implement these new options without service disruption to our plans and participants. Our in-house development team has quickly programmed our systems to furnish detailed audit records for our Plan Sponsors and Administrators.

As uncertain as these times can be, rest assured BlueStar stands ready to adapt to any future changes the Retirement Plan landscape may see.

Have a question? We’d love to hear from you! Call us at 904.273.5220 or send us an email at





Multiple Employer Plan Specialists Closed MEPs. Open MEPs. And Everything Else.

BlueStar is a nationally recognized expert in the administration of Multiple Employer Plans (MEPs). Our systems are purpose-built to serve the special needs of MEPs, and we have deep experience in a wide variety of MEP situations and applications. If and when the legislatively-proposed Pooled Employer Plans (PEPs) become a reality, we'll be ready. Contact us now for more information.

Learn More
businessmen shaking hands around a conference table with computers and celll phones