The Internal Revenue Service (IRS)N has issued a series of an FAQ questions and answers regarding the CARES Act coronavirus-related relief for retirement plans.
The coronavirus-related distribution and loan rules generally apply only to qualified individuals. The FAQ does not expand the definition of a qualified individual (such as someone who had COVID, negative job impact because of COVID, etc) The IRS and Treasury have received and are reviewing comments requesting an expansion of the definition of “qualified individual.”
The FAQ also stated qualified individual may choose to repay all or part of the amount of a coronavirus-related distribution within three years of the date of the distribution, provided that their plan will accept such repayment. If the qualified individual does so, they may claim a refund of the tax paid for coronavirus-related distribution that they included in income prior to the repayment date by amending their tax return.
The FAQ says that if an employer does not adopt coronavirus-related distribution rules under the CARES Act, a qualified individual who receives a distribution for any other reason (e.g., termination of employment or financial hardship) still may treat the distribution as a coronavirus-related distribution on the individual’s federal income tax return.
There was also clarification on a participant’s certification that they are an affected individual for the CARES Act. The plan sponsor may rely on an individual’s certification that the individual satisfies the conditions to be a qualified individual in determining whether a distribution is a coronavirus-related distribution unless the plan sponsor has actual knowledge to the contrary. While the plan sponsor may rely on an individual’s certification in making and reporting a distribution, the individual is entitled to treat the distribution as a coronavirus-related distribution for purposes of the individual’s federal income tax return only if the individual actually meets the eligibility requirements.