NRECA Employee Benefits Weekly

CARES Act Suspends 2020 401(k) Plan Required Minimum Distributions

Posted on Posted in Retirement Benefits

The Internal Revenue Code requires participants in 401(k) plans to withdraw a portion of their account balance each year once they reach a certain age and are no longer providing services to their employer. These withdrawals are called required minimum distributions.

To help alleviate financial stresses arising out of the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security (CARES) Act of 2020 waived the 2020 required minimum distribution requirements.

The week of August 3, 2020, NRECA will send letters to individuals in the 401(k) Pension Plan who fall into one of the following scenarios:

GROUP 1—Participants who have been receiving distributions through a scheduled withdrawal arrangement will be informed that:

  • The CARES Act waives required minimum distributions for tax year 2020.
    • Action is required if they wish to discontinue receiving their scheduled 401(k) account withdrawals. Participants will need to sign, date and return the letter they received to NRECA. Otherwise, if no action is taken, the existing payment arrangement will continue.
    • Participants who discontinue their scheduled withdrawals will need to complete and submit a new 401(k) Pension Plan Scheduled Intermittent Withdrawal Form to resume payments in the future.
  • Participants who have already taken distributions from their 401(k) account this year have the opportunity to repay the distribution. Repayments must be received by August 31, 2020.
    • Participants wishing to repay 2020 distributions to their 401(k) account should call NRECA’s Retirement Plan Distributions Unit to obtain the amount eligible for repayment and instructions for repayment.

GROUP 2—Participants (not included in group 1) who would normally be required to take a minimum distribution and are not taking scheduled withdrawals will be informed that:

  • The CARES Act waives the required minimum distribution requirement for tax year 2020. No further distributions will be made in 2020 unless requested by the participant. Participants who wish to receive distributions from their 401(k) account should call the Retirement Plan Distributions Unit.
  • Participants who have already taken distributions from their 401(k) accounts have the opportunity to repay the distribution. Repayments must be received by August 31, 2020.
    • Participants wishing to repay 2020 distributions to their 401(k) account should call the Retirement Plan Distributions Unit to obtain the amount eligible for repayment and instructions for repayment.

Questions?
Participants with questions about required minimum distributions, repaying a 2020 distribution or taking a withdrawal may call NRECA’s Retirement Plan Distributions Unit at 866.673.2299, option 5, then option 4, or email contactcenter@nreca.coop. Representatives are available from 7 am to 5 pm, Central time.

Disclaimer: NRECA cannot provide legal or tax advice to co-ops. The information presented here is our interpretation of the laws and regulations. Co-ops and participants should seek the advice of their legal counsel and/or tax advisor before taking any action regarding their 401(k) Pension Plan account and when filing tax returns.

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