CARES Act to Provide COVID-19 Relief

CARES ActOn Friday, March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act—known as the CARES Act. The CARES Act is the U.S. government’s response to the COVID-19 pandemic and provides relief to a wide number of areas. Individuals, small businesses, big business, schools, state and local governments, and more are included in the sweeping emergency relief legislation. Not to be lost in the shuffle are several key adjustments to rules regarding retirees and retirement plans.


Before we jump into how the CARES Act impacts retirees and retirement plans, it’s important to note that the CARES Act made Coronavirus testing free. With the goal of limiting the spread of COVID-19, the government took this important step to further decrease an individual’s hesitancy to be tested due to concerns of having to pay for a potentially expensive test.


Individuals with incomes up to $75,000 will receive a one-time direct deposit of $1,200, while married couples with a combined income up to $150,000 receive a one-time payment of $2,400. An additional $500 per child will also be awarded.


If you are considering donating to a charity to aid with coronavirus relief, you may be eligible for a tax deduction on your contributions. Up to $300 is now being awarded as an above-the-line tax deduction in 2020.


One significant change from the CARES Act is that the ten percent early-withdrawal penalty from retirement plans will be waived if the distribution is a coronavirus-related distribution and the distribution is not more than $100,000.

Typically, if you are under 59½ and withdraw funds from your retirement plan — such as an IRA or 401(k)—you are subject to a ten percent early withdrawal penalty. Under this new legislation, the ten percent penalty is waived, assuming the distribution is a coronavirus-related distribution. Coronavirus-related distributions must meet one of the following criteria.

  • The account holder is diagnosed with COVID-19 or with SARS-CoV-2.
  • A spouse or dependent is diagnosed with COVID-19 or with SARS-CoV-2.
  • The account holder experiences adverse financial circumstances due to coronavirus or quarantine-related closure of business, reduced work hours, or being laid off.

The coronavirus-related distribution will still be subject to tax, but the tax can be spread out over three years, or you can roll the money back into the retirement plan during the same three-year window. Significantly, the repayment of funds will not count toward the annual contribution limits.

The loan limit for loans from retirement plans has also increased from $50,000 to $100,000.


Required minimum distributions from IRAs and 401(k)s are suspended for 2020. RMDs are amounts that must be withdrawn from traditional and Roth TSP accounts and traditional IRAs once you reach age 72, and for TSP accounts, once you are separated from federal service. For 2020, RMDs are suspended so as to not force retirees—who may already be in a cash crunch—to pay tax on money that they would rather have left alone. CPA Ed Slott dives into the specifics of RMD waivers in a post for AARP.


At Retirement Benefits Institute, we strive to bring peace and light to federal employees about the many aspects of retirement. In these turbulent times, our goal is unchanged and in fact needed all the more. During this time of social distancing, we are still striving to bring federal employees the clarity they need to make informed retirement decisions. Retirement Benefits Institute’s YouTube channel has a wealth of helpful videos covering FERS, TSP, Social Security, and much more. Please see our registration page for online trainings during this time.