In this episode of Inside the Plan with the 401(k) Brothers, Bill Bush and Andy Bush, advisors at Horizon Financial Group, talk with Melissa Terito, CPA, Partner and Third-Party Administrator at Sentinel Pension about plan sponsors, issues they are facing during the COVID-19 pandemic, and the CARES Act.
Episode Highlights:
- 00:39 – Bill Bush and Andy Bush introduce Melissa Terito.
- 01:08 – Plan sponsors have new measures to adapt to with the CARES
Act.
- 01:55 – What types of calls is Melissa Terito receiving from clients?
- 02:25 – A lot of clients have contacted Melissa Terito about payment
protection.
- 02:55 – What is involved in this CARES Act special coronavirus-related
Distribution to qualify?
- 04:16 – What kind of limits are involved for what an employee can take?
- 05:07 – The employee is going to self-certify.
- 05:59 – What are the pros and cons of the distribution provision.
- 07:36 – Budget the best you can and try to only take out a little bit at a time.
- 09:11 – Are plan sponsors going to be the ones issuing the form to get the
money?
- 10:28 – You can pay the distributions back in three years like a defacto
loan.
- 11:16 – How does the Special Loans provision of the CARES Act work?
- 13:22 – You are still a fiduciary and you still need to abide by your duties.
- 14:12 – Have good communication with your employees.
- 14:43 – What can employees do about the employer match and the
employer contribution during these times?
- 17:03 – They discuss the Paycheck Protection Program.
- 19:32 – Dentists and elective surgeries have been hit hard by COVID-19.
- 20:44 – What deadlines are in place?
3 Key Points:
- To qualify for the CARES Act coronavirus distribution you must either be diagnosed with COVID-19, have a spouse or dependent diagnosed with COVID-19, or have experienced adverse financial consequences as a result of a quarantine, furlough, layoff, or reduction in work hours.
- Through the end of 2020, an employee can take up to $100,000, spread out over more than one time if needed, from their vested account. That would be prorated for taxes or a 3-year time period, unless the participant elects otherwise, and they have the option to roll it back into the plan as an indirect roll-over within 3 years.
- Try not to overreact to the pandemic and overspend your retirement.
Tweetable Quotes:
- (CARES Act) “Right now we have about 10% of our clients who have even asked about it and about 5% who have adopted either one of the provisions or both of them through the CARES Act.” – Melissa Terito
- (CARES Act) Most times, plans only allow hardships for employees that are still employed or participants that are still employed, and anyone can take this type of distribution, whether they are employed or not.” – Melissa Terito
- “There is no notice requirement when you adopt these provisions because you actually haven’t formally amended the plan. Now, I think it is nice to let your participants know that you adopted it.” – Melissa Terito
Resources Mentioned:
