MMC Benefits Handbook
CARES Act Distribution and Loan Provisions
To provide Plan participants with increased flexibility following the coronavirus pandemic, certain temporary changes were made to the distribution and loan provisions under the Plan, as permitted by the 2020 Coronavirus Aid, Relief and Economic Security Act (CARES Act). These changes included the following:
- Availability of Coronavirus-Related Distributions
- Suspension of Loan Repayments
- Waiver of Required Minimum Distributions
See the sections below for specific information regarding each of these changes.
Under the CARES Act, if you were a "qualified individual" under IRS rules (as defined below), you were permitted to request a Coronavirus-Related Distribution (CRD) to be paid prior to December 30, 2020 from your vested account balance under the Plan. CRDs were not subject to the same tax consequences as other distributions. Below is further information on CRDs.
The CRDs were available to both active and terminated colleagues. The CRDs were
- Limited to $100,000 for the 2020 calendar year. You were responsible for limiting your aggregated withdrawals across all 401(k) plans (with current and former employers) and personal IRAs to $100,000.
- Not subject to the 20% mandatory federal tax withholding upon distribution.
- Not subject to the 10% early withdrawal penalty.
Note that if you requested a CRD, the hierarchy for the withdrawal of funds under the CRD was pro rata across all funds and money types.
- Subject to the repayment option below, you must include the CRD in gross taxable income, ratably, over three tax years (beginning with the tax year of the distribution), unless you elect to include all amounts in the tax year of the distribution. You may want to consult a tax advisor.
- If you obtain a CRD from the Plan, you can repay the CRD to an IRA or eligible employer plan (including this Plan) within three years of the distribution. If timely repaid, the CRD amount would not be included in gross income for federal income tax purposes, and you may file amended tax returns if applicable.
- Similarly, if you obtained a CRD from another eligible employer plan (such as a tax-qualified 401(k) or defined benefit plan, a section 403(b) plan or a governmental section 457(b) plan) or a conduit IRA, you may repay that CRD to this Plan as a CRD rollover contribution. This rollover contribution would also need to be made within three years of the distribution, and you must satisfy the applicable documentation requirements listed on the Plan's Incoming Coronavirus Related Distribution Repayment Form. Even if you did not request a CRD from the Plan, if you (i) otherwise took a withdrawal from the Plan on or after January 1, 2020 and before December 31, 2020 and (ii) satisfied the relevant eligibility criteria for a CRD, you may be able to treat your Plan withdrawal as though it was a CRD. However, you should carefully consult with your personal tax adviser to determine if this type of withdrawal may be treated as a CRD for tax purposes.
Suspension of Loan Repayments
If you were a "qualified individual" under IRS rules (as defined below) and you had an outstanding loan under the Plan, you were permitted to temporarily suspend all of your Plan loan repayments due between June 9, 2020 and December 31, 2020.
If you requested a suspension of your loan repayments, your loan payments were reamortized and restarted as of January 1, 2021. Interest accrued between the date of the last loan repayment and December 31, 2020 was added to the outstanding loan balance.
Regardless of the date when your loan was first suspended, the loan's term was generally extended by approximately 9 months from the original expiration date of the term. For example, if your loan term was originally scheduled to expire in March 2021 but you elected to suspend repayments from June 9, 2020 through December 31, 2020, your loan repayments restarted on or around your first payroll in 2021 in the reamortized amount, and the loan term will now expire in December 2021. However, please note that the length of the extension could be shorter for loans taken out after March 27, 2020, where the length of the extension is based on the number of days between the date the loan was issued and December 31, 2020.
If you elected to suspend your loan repayments, you may still repay your loan in full at any time.
Waiver of Required Minimum Distributions
The CARES Act also provided for the waiver of required minimum distributions (RMDs) that were otherwise due to be paid from the Plan in 2020. (For general information about RMDs, please refer to the "Required Minimum Distribution" section.) Unlike the other CARES Act provisions described above, the 2020 RMD waiver applied regardless of whether the participant satisfied the IRS definition of a "qualified individual."
In connection with this RMD relief, effective June 9, 2020, the Plan did not automatically process RMDs that were otherwise due to be paid in 2020. However, participants (including participants who are currently receiving installment payments) had the opportunity to voluntarily elect to receive these RMDs.
If you already received an RMD in 2020 (including ongoing 2020 RMDs that were originally due on December 31, 2020 or first-year RMDs that were originally due on April 1, 2020), you were permitted to roll over the amount of the RMD to an IRA or back into the Plan, thereby retaining the tax deferred status of the distribution, as long as the rollover was completed by August 31, 2020. This rollover option did not apply to any first-year RMDs that were distributed in 2019. Note that if you elected to roll over your RMD back into the Plan by the August 31, 2020 deadline, the amounts rolled over will remain subject to the distribution rules otherwise applicable to amounts held under the Plan.
In addition, pursuant to the CARES Act, for participants who died before January 1, 2020, the 2020 calendar year is disregarded in calculating the 5-year deadline for a non-spouse beneficiary to receive payment of a participant's account balance following the participant's death.
Eligibility for CARES Act Provisions
You were eligible to receive a CRD or have your loan repayments suspended if you satisfied the definition of a "qualified individual" under IRS rules. This means you must have met any of the following conditions:
- You were diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (referred to collectively as COVID-19) by a test approved by the Centers for Disease Control and Prevention (CDC);
- your spouse or your dependent was diagnosed with COVID-19 by a test approved by the CDC; or
- you have experienced adverse financial consequences because:
- you, your spouse, or a member of your household was quarantined, furloughed or laid off, or had work hours reduced due to COVID-19;
- you, your spouse, or a member of your household was unable to work due to lack of childcare due to COVID-19;
- a business owned or operated by you, your spouse, or a member of your household closed or reduced hours due to COVID-19; or
- you, your spouse, or a member of your household had a reduction in pay (or self-employment income) due to COVID-19 or had a job offer rescinded or start date for a job delayed due to COVID-19.
You were required to certify that you satisfied at least one of these conditions when you applied for a CRD or a suspension of your loan repayments.
As noted above, the waiver of 2020 RMDs was available regardless of whether you, your spouse, your dependents or the members of your household were impacted by COVID-19.