On Friday, March 27, 2020, the federal government passed the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. This legislation provides financial relief options for individuals and families impacted by COVID-19 by allowing eligible participants to take distributions and loans from their vested retirement plan balances.
An “eligible participant” is a plan participant who has experienced adverse financial consequences due to COVID-19 as described in the CARES Act. Taking an early distribution or loan from your retirement plan has significant long-term implications for your retirement savings. While Duke is making these options available for those who may need them, careful consideration should be given to the potential ramifications of withdrawing retirement savings.
CARES Act Distributions
Eligible participants can request a CARES Act distribution from their employee and vested employer balances of up to $100,000, subject to contract restrictions. CARES Act distributions are more favorable than hardship distributions because the federal 10% early-distribution penalty is waived, and the federal income tax can be spread over a three-year period. The CARES Act distribution will be available through December 30, 2020.
Plan Loan Provisions
The dollar limit on the general dollar loan has increased from $50,000 to $100,000 for loans taken until September 22, 2020. Eligible participants can borrow up to the lesser of $100,000 or 100% of their vested account balance. Other plan loan provisions remain unchanged. Please note, loans from the Duke Faculty and Staff Retirement Plan are only available through Fidelity.
Eligible participants with outstanding loans may delay current retirement plan loan repayments due now through December 31, 2020.
Required Minimum Distributions
Required minimum distributions due in 2020 can be delayed until 2021. If you have already taken RMD payments in 2020, you may repay these distributions. Contact your retirement service provider for additional information.
Frequently Asked Questions
1. What is the CARES Act?
The CARES Act - the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) is a federal legislation that provides financial relief to individuals and families impacted by COVID-19.
Duke has updated the Duke Faculty and Staff Retirement Plan to incorporate the following CARES Act changes:
- allow eligible participants to take distributions (CARES Act Distributions) from their vested account balances
- increased the maximum loan amount from $50K to $100K and provide payment relief for outstanding loans
- waived requirements to the 2020 required minimum distributions
2. Who is considered eligible for a Coronavirus-related distribution or loan?
- Is diagnosed with COVID-19 on a test approved by the Centers for Disease Control and Prevention (CDC).
- Has a spouse or dependent that is diagnosed with COVID-19 on a test approved by the CDC
- Has experienced adverse financial consequences as a result of:
- Being quarantined
- Being furloughed, laid off, having work hours reduced as a result of the virus or disease
- Being unable to work due to lack of child care due to such virus or disease
- Closing or reduced hours of a business owned by such individual as a result of such virus or disease
- Arising from the effects of the coronavirus on the individual’s spouse or household member (i.e., a person who shares the individual’s principal residence), as well as reductions in pay, rescissions of job offers and delayed start dates.
- Other factors as determined by the Secretary of the Treasury or his delegate
CARES Act Distributions
3. How much can I take as a coronavirus-related distribution?
Eligible participants may take up to $100,000 from qualified retirement plan savings and IRAs in calendar 2020 for those affected by the Coronavirus. Distributions are subject to regular income tax, but exempt from early withdrawal penalties.
Distributions from the Duke Faculty and Staff Retirement Plan must be made from employee and vested employer balances, subject to contract restrictions. Distributions must be made by December 30, 2020.
4. What is the benefit of a CARES Act distribution?
CARES Act distributions are more favorable than hardship distributions because the federal 10% early-distribution penalty is waived, and the federal income tax can be spread over a three-year period. Distributions may also be repaid within the three years to avoid taxation.
5. Can I take $100,000 from each qualified retirement plan?
No, the $100,000 limit is an aggregate of all your retirement plans, which includes 401(k), IRAs and other qualified retirement plans. It is your responsibility to make sure that you are not taking more than the $100,000 limit across all of your retirement plans.
6. How do I take a coronavirus-related distribution?
Contact your retirement service provider where you would like to take the distribution. For contact information see hr.duke.edu/carriers.
You will need to self-certify that:
- You are eligible for a coronavirus-related distribution
- You are not exceeding $100,000 from all coronavirus distributions
- Spousal consent is still required for participants who are married. Most retirement service providers can help you complete the forms. Online notary services may be available.
Plan Loan Provisions
7. How much can I take as a coronavirus-related loan?
The dollar limit on the general dollar loan has increased from $50,000 to $100,000 for loans taken until September 22, 2020. Eligible participants can borrow up to the lesser of $100,000 or 100% of their vested account balance. Other plan loan provisions remain unchanged. Please note, loans from the Duke Faculty and Staff Retirement Plan are only available through Fidelity. Please refer to hr.duke.edu/403bwithdrawal for a description of the Duke Retirement Plan Loan Program.
8. I already have a general loan at Fidelity, can I take a coronavirus-related loan?
No, the Duke Loan Program only allows one general loan to be taken. Please refer to hr.duke.edu/403bwithdrawal for a description of the Duke Retirement Plan Loan Program.
9. How do I take a loan?
Contact Fidelity at 1-800-343-0860 to initiate a loan.
10. Is there a deadline to request a coronavirus-related loan?
You have until September 22, 2020, to request a coronavirus-related loan.
11. Can I delay repayments to current or new loan payments?
Loans that were taken through the Duke Faculty and Staff Retirement Plan are eligible for a delay in repayment regardless of when the loan was initiated. You may delay your loan repayment by contacting your retirement service provider. Interest will continue to accrue during this time.
Required Minimum Distributions
12. Are Required Minimum Distributions (RMDs) for 2020 impacted?
RMDs can be suspended for 2020, allowing opportunity to recoup any market loss and savings to build back up. Please note: This only applies to the 403(b) Faculty and Staff Retirement Plan. This does not apply to the 457(b) Deferred Compensation Plan.
13. Will RMDs be suspended automatically?
No, if RMD payments are in process, these will not stop automatically. Contact your retirement service provider to suspend any RMD payments for 2020.
14. I have already received my 2020 RMD, can I pay it back to the plan?
Yes, participants can repay an RMD already taken in 2020. Contact your retirement plan service provider for additional information.
15. If 2020 was the first year for my RMD, do I need to take two distributions in 2021?
It depends on your situation. If you were subject to RMD for the first time in 2019, but planned to take the initial RMD payment in 2020 (on or before 4/1/2020), then you may elect to defer the 2019 RMD until 2021, but will be required to take two payments in 2021. If 2020 was the first year for an RMD, then you will not be required to take two in 2021. Contact your retirement plan service provider to review your specific situation.