What does the CARES Act mean for me and my options to withdraw from my 401(k) account?

With the recent enactment of the CARES Act, Guideline is here to support you. The law has recently changed and we’ve put together this cheat sheet to help participants understand the changes and options that may be available if you are considering withdrawals from your 401(k) account during this difficult time.

Coronavirus-related hardship distribution

This distribution is available to people who meet any of the following criteria:

  • Diagnosed with COVID-19 
  • Experienced a financial hardship from COVID-19, such as layoff, reduced hours, or furlough
  • Unable to work due to lack of child care
  • Closure of your business between now and December 31, 2020  

If you meet this criteria, a COVID-19 hardship distribution comes with many added benefits:

  • The 10% early withdrawal penalty will be waived, but the funds will still be subject to normal income tax
  • You have the option to waive federal tax withholding for the COVID-19 hardship withdrawal and pay the taxes owed over 3 years
  • Ability to withdraw up to 100% of your vested account balance up to $100k
  • Option to repay hardship distribution over 3 years, tax-free
  • Lowered minimum eligible request amount of $500

To get started, fill out the Hardship Withdrawal Application and Coronavirus-related distribution Addendum located in your Guideline dashboard under the Forms & Templates folder. 

Changes to loans due to impact from COVID-19:

  • Lesser of up to 100% of vested account balance or $100k
  • Outstanding loans may defer payments for 1 year
  • The 5 year loan repayment periods can now be extended by 1 year

Start the process of taking out a loan from your 401(k) account in your Guideline dashboard under the Loans page.

Update on Required Minimum Distributions (RMDs):

  • There are no required minimum distributions for 2020
  • If your 2020 RMD was already taken, you may be able to rollover the distributed funds within 60 days of taking a distribution.

If you have any questions, please don’t hesitate to reach out. Our Participant Success team is available to help you navigate your options. Please contact us at support@guideline.com.

 

Interested in more information on the CARES Act? See our Guideline Blog -

What the Coronavirus Relief Package Means for Your 401(k) Account.

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