Shannon Katz and Adam Shaker, LGA Audit & Assurance managers, discuss the CARES Act ahead of this year’s benefits plan audit season. While the CARES Act was a wide-reaching bill, Shannon and Adam discuss some of the ways it affected 401(k) plans.
One significant change that applied to everyone with a 401(k) was that the CARES Act waived any required minimum distribution for individuals of all ages. Now that 2020 has ended, the required minimum distribution will return.
Most of the changes from the CARES Act affect qualified individuals. A qualified individual is anyone who has experienced adverse financial consequences due to Covid-19. Everything from loss of work, reduced hours, or loss of childcare could count towards being a qualified individual. For those individuals, the CARES Act created the option to take up to a hundred thousand dollar distribution, not subjected to the 10% early withdrawal tax for those under 59 and a half years old. 401(k) loans have been extended, as well. Any loan repayments that were due from March 27th, 2020 through the end of the year are now suspended for a year. The loan payment delays could change payment schedules for some qualified individuals and employers.
There are additional steps outside of the changes implemented by the CARES Act that individuals can take in order to help with 401(k) balance that you can discuss with your advisor.
Financial planning, auditing, and assurance can help to ensure that loans are paid and planned for through the new Cares Act changes. If you have any questions regarding the CARES Act and how it may have impacted your 401(k), reach out to LGA. We’re here to help.
LGA’s Audit & Assurance department can help in preparing for this year’s benefits plan audit season: https://www.lga.cpa/audit-assurance/
For financial guidance, LGA is here to help with all your needs: https://www.lga.cpa