Pending CARES Act Would Provide Relief to IRA, Self-Directed Solo 401k and ROBS 401k Plans

March 21, 2020 | By Mark Nolan

The pending Coronavirus, Aid, Relief, and Economic Security (CARES) Act, which was introduced by Senate Majority Leader Mitch McConnell (R-KY) this week would have the following effects on retirement plans such as self-directed IRAs, self-directed solo 401k plans and ROBS 401k plans.

Distributions Due Hardship

The 10% early distribution penalty, which applies to distributions made prior to the participant reaching age 59 1/2, would be waived on early withdrawals up to $100,000 if the individual meets the following:

is diagnosed with COVID-19;
whose spouse or dependent is diagnosed with COVID-19;
who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to COVID-19; or
other factors as determined by the Treasury Secretary.

Individuals would be permitted to pay tax on the income from the hardship distributions over a three-year period.
Individuals could also choose to repay hardship distribution amounts back to the plan over the next three years.
Th repayments would not count toward the annual retirement account contribution limits.

401k Participant Loans

Solo 401k and ROBS 401k participants would be able to borrow up to $100,00 from their 401k plans.

Participants with outstanding 401k loans could delay their loan payments for one year.

Relief From Required Minimum Distributions (RMD)

RMDs would be waived for calendar year 2020 for 401k plans including solo 401k plans, 403b and 457b plans, as well as SEP and SIMPLE IRAs.

Latest Upstate on the Coronavirus Stimulus

Now that both the House and the Senate have approved the Coronavirus, Aid, Relief and Economic Security (CARES) Act (H.R. 748 as amended) it is only a matter of days before it makes its way to President Trump’s desk for final approval. All the pending changes to retirement plans including self-directed solo 401k and ROBS 401k plans that are listed above are included in the pending bill, so the odds are good that they will all pass.