On May 4, 2020, the IRS posted 14 Questions and Answers (Q&As) on its website regarding the special retirement plan distribution options and loan provisions made available to certain qualified participants under the Coronavirus Aid, Relief, and Economic Security Act (hereinafter, the “CARES Act”). These Q&As answer many, but not all, of the questions that plan sponsors and third-party administrators have been grappling with since the CARES Act was enacted on March 27, 2020. Perhaps most importantly, the Q&As confirm that each of the distribution and loan provisions are optional for employers to adopt (or not adopt). They also indicate that the IRS intends to issue formal guidance regarding the CARES Act distribution and loan provisions in the near future, and that it anticipates that the guidance will generally apply the principles set forth in its prior guidance (Notice 2005-92) regarding the Katrina Emergency Tax Relief Act of 2005 (“KETRA”).
A frequently overlooked portion of the CARES Act offers employers the ability to give their employees some immediate – and cost-free – financial assistance. The Act opens the door for employees to use pre-tax dollars to purchase over-the-counter drugs and menstrual care products. Employers will need to modify health FSAs, HSAs, and HRAs to take advantage of this relief.