A Lifeline for COVID-19 Financial Hardship
With so many Americans struggling financially due to COVID-19, Congress has passed three emergency packages to respond. As we recently detailed, its third effort, the CARES Act, includes sweeping measures to help a wide cross section of Americans.
The CARES Act expands access to retirement funds, providing a critical lifeline to those struggling to make ends meet.
The Act allows eligible participants to withdraw up to $100,000 from their retirement savings throughout 2020. It waives the 10% tax penalty that normally applies to early withdrawals. Income attributable to these withdrawals may be spread over three years or recontributed to an eligible retirement plan within three years. And for a limited time, plans may permit eligible participants to borrow up to $100,000 or 100% of their savings and delay loan repayments for up to 1-year.
Eligible participants are those diagnosed with the coronavirus, who have a spouse or dependent diagnosed, or those:
- quarantined, furloughed, laid off, or who have reduced hours
- unable to work because they lack childcare
- who own or operate a business who have had to close or reduce hours
- with other financial hardship outlined in guidance from the IRS
We often highlight the importance of saving for retirement, and clearly tapping into these savings should be a last resort, especially given the current market conditions. However, for those struggling to make ends meet, these options can help keep their heads above water financially.
Just as life insurers are meeting the moment in aiding their local communities, many are also helping policyholders who need emergency access to their retirement accounts, including:
- Temporarily waiving fees on retirement coronavirus-related account withdrawals
- Not charging plan sponsors for amending their plans to implement the CARES Act
- Forming dedicated teams to provide education and other support to plan participants
- Providing guidance and webinars to help customers and financial professionals navigate the CARES Act
Whatever challenges COVID-19 poses, life insurers stand firmly committed to helping communities, policyholders, and lawmakers overcome them.