The Consolidated Appropriations Act, 2021 provides emergency assistance and health care response for individuals, families and businesses as a result of the Coronavirus (COVID-19) pandemic. The Act also provides relief designed to increase liquidity in the economy including modifications to the rules on the use and distribution of retirement funds.
Coronavirus-Related Distributions from Money Purchase Plans. A money purchase plan is considered an eligible retirement plan for purposes of the waiver from the 10-percent additional tax for early qualified coronavirus-related distributions from a plan. An eligible participant of a money purchase plan who receives such distributions that is an in-service withdrawal can include them in gross income over a three-year span and have three years to repay them without being subject to the 10-percent additional tax.
Disaster Relief-Related Distributions from Retirement Plans. The 10-percent additional tax under Code Sec. 72(t) is waived for any qualified disaster relief-related distributions from a retirement plan. Eligible individuals who take such distributions can include them in gross income over a three-year span and have three years to repay the amount.
Qualified Transfers from Pension Plans for Covering Future Retiree Costs. An employer maintaining a defined benefit plan that has made a qualified future transfer may not later than December 31, 2021, elect to terminate the transfer period with respect to such transfer effective as of any tax year specified by the taxpayer that begins after the date of the election.
Relief provided for loans from qualified plans. The threshold limit on loans from a qualified retirement plan made during the period from December 27, 2020, to June 25, 2021, for a qualified individual affected by a qualified disaster is increased to the lesser of $100,000 or 100 percent of the present value (but not less than $10,000) of the plan participant’s benefits under the plan.
Partial Termination of Qualified Retirement Plans. A qualified retirement plan will not be treated as having a partial termination during any plan year that includes the period beginning on March 13, 2020, and ending on March 31, 2021, if the number of active participants covered by the plan on March 31, 2021, is at least 80 percent of the number of active participants covered by the plan on March 13, 2020.
If you have any questions, please contact the Crosslin tax team at (615) 320-5500. We are here to help!