The Coronavirus Aid, Relief and Economic Security (CARES) Act, authorizes employers to make changes to their qualified retirement plans to increase loan limits, delay loan repayments, and make distributions to plan participants experiencing certain COVID-19 related circumstances. Due to a lack of guidance from the IRS, there’s confusion among third-party administrators (TPAs) about how to administer these changes, resulting in potential issues with forms used by TPAs to approve these CARES Act loan and distribution changes.

We have reviewed several third-party administrator forms and client communications, and wanted to provide some clarity with regard to the following CARES Act changes:

• Plans that allow loans may be required to permit participants with qualifying COVID-19 related circumstances to delay loan repayments with due dates occurring between March 27, 2020, and Dec. 31, 2020, for one year.
• Increasing loan limits from $50,000 to $100,000 for participants with qualifying COVID-19 related circumstances is optional.
• Allowing distributions of up to $100,000 to participants with qualifying COVID-19 related circumstances is optional.