A Tale of Two Loan Repayment Changes
Spotlight on Benefits Blog
The Coronavirus Aid, Relief, and Economic Security (CARES) Act suspended 401(k) loan repayments for qualified individuals that are due between March 27, 2020, and December 31, 2020. Qualified individuals include plan participants (1) who have been diagnosed with COVID-19, (2) whose spouse or dependents have been diagnosed with COVID-19, or (3) who experiences adverse financial consequences as a result of COVID-19. The CARES Act allows the loan period to be extended to account for the suspension, and prior IRS guidance in Notice 2005-92 allows the loan to be reamortized.
There is another loan provision included in Notice 2020-23 that effectively delays repayment of all 401(k) loans. Notice 2020-23 Section III.A. defines affected taxpayers to include anyone performing a “time-sensitive action” listed in Revenue Procedure 2018-58, which applies to any taxpayer affected by a federally declared disaster and includes in the list of actions payment of 401(k) plan loans.
The material contained in this communication is informational, general in nature and does not constitute legal advice. The material contained in this communication should not be relied upon or used without consulting a lawyer to consider your specific circumstances. This communication was published on the date specified and may not include any changes in the topics, laws, rules or regulations covered. Receipt of this communication does not establish an attorney-client relationship. In some jurisdictions, this communication may be considered attorney advertising.
Meet the Authors
