Coronavirus - COVID-19March 31, 2020

A Quick Rundown of Retirement-Related Provisions in the Federal Government’s Stimulus Package

The $2.2 trillion legislation included a comprehensive suite of actions related to the governance and support of the country’s retirement funds.

Reported by Steffan Navedo-Perez

The United States federal government’s $2.2 trillion stimulus package includes a number of different provisions related to the retirement of American workers and the maintenance of pension funds across the country.

Beneficiaries and pension plan sponsors both received measures to help with their own particular issues, with a particular focus on providing liquidity and leniency for capital transfers between the two.

One of the highlight rulings from the legislation was to waive the early withdrawal fees typically attributable to any withdrawal up to $100,000.

The legislation then incentivizes individuals to return the capital back to their pension plans within three years, by removing the annual contribution cap and taxing the withdrawals as ordinary income if not refunded over the given three-year period.

Additionally, there was a bump in the maximum threshold of loans from qualified plans from $50,000 to $100,000.

Pension plans are given allowance to circumvent existing legislation that prohibited them from dishing out lump sums to plan participants if their funded status fell below 80%. Being that market volatility has been so high recently, and equity market valuations may have dropped and subsequently pension plans’ funding ratios, the federal government permitted the pension plans to file an earlier valuation of their balance sheet, in case a fall below 80% was brought upon solely by recent market swings.

Additionally, the minimum threshold for distributions inclusive of individual retirement accounts (IRAs) and additional retirement plan accounts are expected to be waived for the remainder of the year.

The U.S. Securities and Exchange Commission (SEC) recently provided a relaxed set of new regulations tailored to reporting requirements from public companies, investment advisers and funds. That and the stimulus bill serve to help the public in what is expected to ultimately surmount to an “unprecedented shock” to the global economy, with Moody forecasting G20 economies’ GDP to contract 0.5% in 2020, and S&P Global predicting a recession later this year.