The CARES Act: Highlights of Benefits Provisions - UPDATE

The CARES Act: Highlights of Benefits Provisions - UPDATE
Riker Danzig Employee Benefits Client Alert March 29, 2020

The Coronavirus Aid, Relief and Economic Security Act (“CARES Act,” or “Act”) has been signed into law. Among the several economic relief efforts included in the Act are the following key benefits-related provisions:


The CARES Act allows for plan distributions and loans that mirror provisions previously approved in legislation enacted in response to federally-declared disasters.

1.  Plan Distributions. Employers that sponsor Code Section 401(k) plans, 403(b) plans and governmental 457(b) plans may allow coronavirus-related hardship distributions of up to $100,000, with the following requirements and benefits:

(a)   Such hardship distributions would be available to individuals:  

(i)   diagnosed with COVID-19 by a CDC-approved test; or

(ii)  whose spouse or dependent has been diagnosed with COVID-19; or

(iii) who experience financial adversity as a result of  

-         undergoing quarantine, being furloughed, laid off or having hours reduced;

-         being unable to work because of a lack of child care;

-         the closing or reduction in operating hours of a business owned or operated by the individual; or

-         other factors determined by the Secretary of the Treasury.

(b)  The distributions may include funds that would otherwise not be considered  distributable under the plan.

(c)   Such distributions would be without penalty (e.g., otherwise applicable to premature   distributions) and not subject to 20% withholding.

(d)  To ease the tax burden, the recipient could include the distribution in their income  over a 3-year period.

(e)  The distributions would be repayable to a tax-qualified plan or IRA within 3 years  and treated as a direct trustee-to-trustee transfer or rollover made within 60 days of the  distribution.

(f)  The distributions would be permitted under a plan as of the date of enactment of the  Act until December 31, 2020. 

2.  Plan Loans.  For the 180-day period beginning on the date of enactment of the Act, the limit on plan loans would be increased to the lesser of (i) $100,000 (up from $50,000) OR (ii) the greater of $10,000 or 100% (up from 50%) of the present value of the participant’s vested benefit under the plan. Those individuals who have loan repayments due in 2020 and who would qualify for a coronavirus-related hardship distribution would in general have an additional year to make such loan repayments.

3. Required Minimum Distributions. The Act waives required minimum distributions (“RMDs”) required for calendar year 2020 from certain retirement plans (e.g., an eligible retirement plan, such as a 401(k) plan, a Code Section 403(a) or 403(b) plan, an eligible deferred compensation plan under Code Section 457(b), but only if maintained by a state or state governmental agency or subdivision (as described in Code Section 457(e)(1)(A)), and an IRA). An RMD made prior to 2020 is not eligible for the waiver.

4. Delay in Required Minimum Funding Contributions for Certain Defined Benefit Plans.  The Act permits the sponsor of a single-employer defined benefit plan to delay minimum funding contributions (including quarterly contributions) until January 1, 2021, provided that interest from the original due date for the required contribution until the payment date is included in the delayed contribution.

5. Authority of the Department of Labor to Delay Deadlines.   As with past emergencies (such as terroristic or military action), the Department of Labor is authorized under the Act to postpone certain deadlines upon the declaration of a public health emergency.

6. Plan Amendments.   Plan amendments needed to reflect plan distributions, plan loans or RMDs, as authorized under the Act, may be made retroactively if the plan is operated as if the amendments were in effect prior to adoption. In general, such amendments may be adopted on or before the last day of the first plan year beginning on or after January 1, 2022.


The CARES Act provides a safe-harbor to permit HSA-eligible high-deductible health plans to provide telehealth or other remote health care services without, or with reduced, cost-sharing deductibles; this safe harbor would be available from the date of enactment of the Act until the end of the 2021 plan year.

In addition, the Act (i) clarifies the requirement to provide COVID-19 diagnostic testing under a health plan (e.g., such testing need not be based on products approved by the FDA) and references the rates applicable for tests conducted by in-network and out-of-network providers; and (ii) explains the required coverage of a COVID-19 vaccine by a group health plan.

Finally, the Act clarifies the limits on amounts that employers are required to pay for emergency sick leave or public health emergency leave under the Families First Coronavirus Response Act, enacted on March 18, 2020:

(a) the maximum amount to be paid an employee on paid public health emergency leave available under the Family and Medical Leave Act (FMLA) is $200 per day, to a maximum of $10,000 for the period of leave;

(b)  the maximum amount to be paid an employee for emergency sick leave would be (i) $511 per day (to a maximum of $5110 for the leave period), provided the leave is taken because of an order for isolation or quarantine, to seek treatment for COVID-19, or to self-quarantine; and (ii) $200 per day ($2,000 in total) if the leave is taken to care for a family member to care for a child unable to attend school or for child care because of the virus, or for other circumstances recognized by the Secretary of Labor.  

We will provide additional information as developments progress.

If you have any questions regarding the CARES Act, please feel free to contact James Karas, Robert Daleo, Jason Navarino or other members of our Employee Benefits and Executive Compensation Group.         

Please visit Riker Danzig’s COVID-19 Resource Center to stay up to date on all related legal issues.