6 Ways the CARES Act Affects Retirement Plans, IRAs and HSAs

The recently enacted CARES Act loosens rules surrounding retirement plans, IRAs, and high-deductible health plans. Here’s what you should know.

DSB_Marketing April 9, 2020

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law on March 27, 2020. Totaling more than $2 trillion, the package ushers in a broad range of measures designed to provide U.S. individuals and businesses with emergency economic relief, including several related to retirement vehicles and to high-deductible health plans.

Generally speaking, these provisions make it easier for participants to access, use or keep funds held in retirement plans, individual retirement accounts (IRAs), and Health Savings Accounts (HSAs). Here are six ways the CARES Act has loosened the rules.

1. Coronavirus-related distributions (CRDs) allowed

The CARES Act defines a CRD as a distribution from an eligible retirement plan between the dates of January 1, 2020, and December 31, 2022, to a “qualified individual.”

A qualified individual could be someone who is:

  • Diagnosed with COVID-19
  • Married to someone diagnosed with COVID-19
  • Experiences adverse financial consequences as a result of quarantine
  • Laid off, furloughed, or operating under reduced work hours due to COVID-19
  • Unable to work due to lack of childcare due to COVID-19
  • An owner or operator of a business that is closed or operating under reduced hours due to COVID-19

Qualified individuals who are participants in qualified plans or IRA beneficiaries may take or make CRDs up to an aggregate of $100,000. And here’s the really good news: these distributions are not subject to the 10% early distribution penalty. Participants may either repay the CRD within three years of the distribution date or, in lieu of repayment, make a contribution to an eligible retirement plan that qualifies for rollover contributions. Tax withholding is not required.

2. Ability to spread CRD amounts across three taxable years

Participants must include CRD amounts in their taxable income. However, participants may spread these amounts over three taxable years, beginning with the taxable year in which the distribution was taken

3. Required minimum distributions (RMDs) waived for 2020

Participants who are eligible for RMDs may defer distributions to the following year.

4. Increased loan amount from qualified plans

Previously, qualified retirement plans could loan participants up to $50,000. The CARES Act has doubled this limit to $100,000. What’s more, these loans are not limited to 50% of a participants’ non-forfeitable accrued balance.

5. More time to repay retirement plan loans

Qualified individuals who have an outstanding loan from a qualified plan may delay payments between the dates of March 20, 2020, and December 31, 2020, for one year.

6. Expanded coverage for telehealth visits

Telehealth services are now covered by high-deductible health plans with HSAs, even if the participant has yet to meet the plan deductible. Participants may still be required to pay a co-pay if their plan requires it. Unless extended by Congress, this provision will expire after December 31, 2020.

There are other provisions available for people with high-deductible health plans related to coverage for Coronavirus testing, clinic visits and treatment. Check with your health plan provider on your specific coverage.


If you have questions about any of these CARES Act provisions, contact your CPA at DS+B today. For more about economic relief measures included in the CARES Act, please read our recent blog post.