CARES Act and Financial Planning


The largest stimulus package in American history, called the CARES Act, has been passed to provide relief for individuals and small businesses. While there are many items included in the $2.2 trillion piece of legislation, some are important provisions specific to financial planning.

  • Required Minimum Distributions (RMD) Waived (including those due by April 1, 2020)
  • Early Withdrawal Penalty Waived (for coronavirus-related distributions)
  • Tax Liability Spread and Repayment Option (for coronavirus-related distributions)
  • Employer Plan Loans Increased (for 180 days from passage of the Act)
  • Student Loan Repayments Suspended (for 180 days from passage of the Act)
We’ve provided a brief summary for you about each of these below.

RMDs Waived

To prevent you from having to take a distribution during an unfortunate time, the RMDs for 2020 have been waived. Not only is this waiver for all employer plan and IRA owners, it also applies to beneficiaries of inherited accounts. 

Also included in the waiver are RMDs for individuals who turned 70½ in 2019 and were waiting to take their first distribution by their Required Beginning Date (Apr. 1, 2020). If you fall into this category you will not have to take a 2019 nor 2020 RMD.

You will need to notify us if you don’t want your scheduled RMD processed for 2020.

Early Withdrawal Penalty Waived

Generally, individuals under the age of 59 ½ who take a distribution from a qualified account* are required to pay a 10 percent early withdrawal penalty in addition to ordinary income tax on the distribution.  There are certain exceptions that waive the early withdrawal penalty.

With this Act, individuals can withdraw up to $100,000 penalty free for coronavirus-related distributions from their qualified accounts. A coronavirus-related distribution is made by an individual:

  • Who is diagnosed with COVID-19
  • Whose spouse or dependent is diagnosed with COVID-19
  • Who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to COVID-19, or closing or reducing hours of a business owned or operated by the individual due to COVID-19

Note: Plan administrators and IRA custodians will rely on your self-certification of meeting at least one of these requirements.

Tax Liability and Repayment Option for Qualified Account* Distributions

For coronavirus-related distributions (described in the previous section), the tax liability will be spread evenly over a 3-year period. Individuals can elect to include all of the income from the distribution on their 2020 tax return.

For those who want to avoid the tax payments and would rather repay the distributions taken, individuals can make one or more contributions up to the total amount taken over a 3-year period starting the day after the distribution is received. These contributions will be in addition to the regular contribution limits.

Note: This means the usual 60-day rollover timeline and the once-per-year rollover rule will not apply for coronavirus-related distributions.

Employer Plan Loans

Typically, plan participants can take a loan up to the lesser of $50,000 or 50 percent of their account value. For a 180-day period beginning from the enactment of the Act, participants impacted by the coronavirus (as defined above) will be able to take a loan from their employer plan up to the lesser of $100,000 or 100 percent of their vested account value.

Student Loan Repayments

The stimulus package allows student loan borrowers a six-month break from payments from April through September. During this time, no interest or penalties will be incurred. The ability to suspend payments is for federal loans only and does not apply to private student loans (although private lenders may be individually offering relief for borrowers).

Here to Help. 

We recognize this is a lot of information and the greatest question you have might be, “What does it all mean for me?” We want you to know we’re here to help you get through these immediate needs and what’s to come next.

If you would like to discuss implications of the Act for you and your family, we can meet either by phone or video chat.


Tim Carlson, Alex Burian, and Bob Dillon
WESTconsin Investment Advisors

*Qualified account refers to investment plans funded by pretax income, usually in the form of a contribution to a retirement account. Funds used in a qualified account do not become subject to taxation until the investor withdraws them.

Representatives are registered, securities sold, advisory services offered through CUNA Brokereage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, which is not an affiliate of the credit union. CBSI is under contract with the financial institution to make securities available to members. Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America. © CUNA Mutual Group, 2020. All rights reserved.


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