Note:  Additional clarification and guidance is provided daily.  We will update the FAQ as quickly as we can.  CONTACT YOUR DBZ ADMINISTRATOR PRIOR TO IMPLEMENTING ANY CHANGES TO YOUR PLAN 


What is the CARES act?   

President Trump signed into law the Coronavirus Aid Relief and Economic Security Act (CARES Act) March 27, 2020.  Specific to qualified retirement plan participants, this law permits plan sponsors to adopt provisions that will allow Qualified Individuals to receive distributions, take loans or forgo receiving required minimum distributions (RMD) from a defined contribution plan.  


Are there any distribution options for participants who might otherwise not be eligible for a distribution?

Employers may elect to amend their retirement plan to allow qualified individuals the option of taking a distribution of up to $100,000 of their account balance without penalty.  Distributions must be taken no later than December 30, 2020.


Who can receive a distribution? 

Qualified Individuals may receive a distribution from the plan.  A Qualified Individual 

  • Includes any individual (or spouse or dependent of that participant) who is diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention, or  
  • Individual that experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury (or the Secretary’s delegate). 


What proof does the plan sponsor need to collect in order to verify that a participant is a Qualified Individual? 

You may rely on a participant’s certification that they meet the criteria of a Qualified Individual, documentation is not required. 


Do participants have to take their Required Minimum Distributions (RMDs) in 2020: 

Participants are still required to take RMDs from Defined Benefit Plans.   

RMDs required from all other types of plans distributed in 2020, normally due by April 1, 2020 or December 31, 2020 have been waived.   


Employees are asking about taking distributions from their 401(k) plan.  If they are not yet age 59 ½, will they have to pay an early withdrawal penalty 

Qualified Individuals will not be subject to the 10% early withdrawal penalty. 


Adding $100,000 to income can create a significant tax liability.  Is there any tax relief for this distribution? 

The participant may elect to have the distribution included in their taxable income pro-rated over a 3 year period.   


Will 20% be withheld for taxes? 

No.  20% withholding is not required.  Participants may elect their tax withholding amount. 


Can they put the distribution back into the plan? 

Yes.  Participants may repay the distribution back to the plan (or another eligible retirement plan or IRA) if paid within 3 years.   


Can employees that are still employed receive a distribution? 

Yes, if they meet the criteria of a qualified individual. 


If I offer more than one retirement plan, can a participant receive multiple distributions? 

No.  The $100,000 is cumulative over all retirement plans, including IRAs, including members of a control group. 


Instead of a distribution, can a Qualified Individual take a loan from the plan? 

Yes, the Plan may be amended to allow Qualified Individuals to take a loan 

  • to receive a loan of up to the lesser of $100,000 or 100% of vested balance. 
  • Loans must be taken before September 23, 2020. 


Can a Qualified Individual who already has a loan, which is up to date and in good order, defer their loan payments? For how long? 

If adopted by the Plan Administrator, a Qualified Individual may request the deferment of scheduled loan payments from March 26, 2020 through December 31, 2020 for up to 1 year.  The 1 year suspension will be added to original loan term and include accrued interest.   


Can a Qualified Individual take both a $100,000 loan and a $100,000 distribution? 

Yes.  The $100,000 limit applies separately for both loans and distributions.   


Does my plan need to be amended to utilize either the coronavirus related distributions or enhanced loans provisions? 

Yes, the plan will need to be amended to allow for these provisions. 


When does my plan have to be amended if participants want to take the coronavirus related distributions or loans now? 

Employers have until the last day of the plan year beginning on or after January 1, 2022 to retroactively amend their plan. 


Is there any special relief for funding of a Defined Benefit or Money Purchase Plan: 

  • Required contributions due in 2020 may be delayed until January 1, 2021. 
  • Interest must be paid on the contributions from the original due date through the deposit date using the plan’s effective interest rate for the plan year in which the deposit is made. 


Other pertinent questions: 


Do I still have to fund my 2019 safe harbor contributions? 

Yes.  As of April 1, 2020 you will still need to fund your 2019 safe harbor contributions.   


Can I stop my 2020 safe harbor contribution? 

Yes.  You may amend your plan to stop your 2020 safe harbor contributions.  A Notice will need to be provided to participants 30 days prior to the effective date of the amendment.  You will need to fund the contribution up until the effective date of the amendment.                



Can we suspend or stop other non-safe harbor contributions? 

Maybe.  Discretionary contributions may be stopped at any time.  Fixed contributions stated in the plan document may need to be at least partially funded.  In addition, top-heavy plans may still need to fund top-heavy minimum contributions. 


Are we still required to fund 401(k) deferrals timely? 

Yes. 401(k) deposits are still required to be made timely according to the DOL guidelines. 

Keep in mind that participants can stop making deferrals at any time (they’ll need to complete a salary deferral agreement form do so). Once they have stopped, they may re-commence or modify their deferral amount or percentages per the frequency stated in the plan document. 


What is the impact on our retirement plan if we terminate or lay off a large group of employees? 

If 20% of your workforce is terminated or laid off, the plan may be subject to partial termination rules which would require 100% vesting of affected participants.  Contact your administrator. 


Can we fund our employer contribution for 2020 early?

Maybe.  You will need to contact your DBZ  administrator to find out the specific provisions of your plan document to determine if this is an option for your plan.