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CARES Act - Coronavirus distribution allowable from Money Purchase plan?


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Is a Coronavirus distribution allowable from a MP plan if a participant has not otherwise satisfied the normal distribution requirements?

Although 2202(a)(4)(c), if you follow through all the reference trails, might appear to allow it, it seems like it isn't covered under 2202(a)(6)(B), and therefore not allowed?

Thoughts?

P.S. - just saw the following from Ilene Ferenczy in yesterday's Benefits Link Newsletter, which confirms my thoughts. My thanks to Ilene for her write-up!

"The bill permits any “eligible retirement plan,” including qualified plans, IRAs, 403(b) plans and governmental 457(b) plans, to make a coronavirus-related distribution.  The bill makes it clear that the provisions in Code sections 401(k), 403(b), and 457(b) that limit distributions will not be violated by coronavirus-related payments, but provides no such relief for defined benefit or money purchase plans (which cannot make in-service distributions prior to age 59-1/2)."

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From TAG - any thoughts?

It would be permissible to allow coronavirus‐related distributions from a pension plan, however, in  order for a qualified individual to be eligible to receive such a distribution, they would either have to  have terminated employment or attained age 59 ½. The CARES Act did not provide an exception to  the age 59 ½ age requirement under IRC §401(a)(36) for in‐service distributions from pension plans. 

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3 hours ago, Belgarath said:

It would be permissible to allow coronavirus‐related distributions from a pension plan, however, in  order for a qualified individual to be eligible to receive such a distribution, they would either have to  have terminated employment or attained age 59 ½. The CARES Act did not provide an exception to  the age 59 ½ age requirement under IRC §401(a)(36) for in‐service distributions from pension plans. 

I agree

Ed Snyder

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  • 2 weeks later...

This was a hot topic of conversation on another listserv and the conclusion was the same. However, the CARES Act information being distributed from some record keepers is offering the COVID distribution as an option for money purchase plans. 

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  • 1 month later...

Does the answer change if a 401k Plan includes a merged MPP transfer balance? In other words, may a 401k plan distribute from the “MPP source” for CARES prior to age 59-1/2? The source includes normal MPP restrictions, but it seems like CARES Act allows because the plan is a 401k, not a MPP. Thank you for sharing your opinions.

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  • 6 months later...

In the Consolidated Appropriations Act, 2021 (enacted December 27, 2020), § 280 amends CARES Act § 2202(a)(6)(B) to treat a money-purchase plan as not failing to meet an Internal Revenue Code of 1986 § 401(a) distribution rule because the plan provides a coronavirus-related distribution, even if it is an “inservice withdrawal”.  That change “shall apply as if included in the enactment of section 2202 of the CARES Act.”

 

https://www.govinfo.gov/content/pkg/BILLS-116hr133enr/pdf/BILLS-116hr133enr.pdf

 

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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The reference is to § 280 under subtitle B “COVID-related Tax Relief Act of 2020”, which is under title II “Assistance to Individuals, Families, and Businesses”, which is under Division N “Additional Coronavirus Response and Relief”.

 

In the linked-to enrolled bill, that § 280 is on page 801.

 

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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