The act was signed into law by the president on March 27 and provides options for you to consider as you navigate financial decisions in the coming months. As always, we recommend reaching out to your TIAA financial consultant to review your current situation–along with short- and long-term financial goals–before making any decisions.
The university has chosen to adopt the following CARES Act provisions for our retirement plan(s):
- Penalties and withholding are waived for qualified distributions from retirement plan accounts
- Retirement plan loan limits have been increased
- Optional suspension of required minimum distributions (RMDs) for 2020
In addition to these CARES Act relief measures, the deadline for 2019 Individual Retirement Account (IRA) contributions has been extended from April 15 to July 15, 2020.
Retirement plan withdrawals and loans
Who is eligible?
You are considered eligible to take distributions/loans from your retirement plan if any of the below conditions are met:
- You have been diagnosed with COVID-19 by a test approved from the Centers for Disease Control and Prevention
- You have a spouse or dependent who has been diagnosed with COVID-19
- You suffer financial consequences as a result of quarantine, employment furlough, layoffs, reduced work hours or cannot work due to lack of child care as a result of coronavirus
- You experience a financial loss to an individually owned or operated business that is caused by a closing or reduction of hours due to coronavirus
- Other factors as determined by the Secretary of the Treasury or his delegate
How can the act help if you are eligible?
Penalties and withholding are waived
Provided the above eligibility criteria are met, the CARES Act waives the 10% early withdrawal penalty and eliminates the 20% withholding for coronavirus-related distributions of up to $100,000 across qualified retirement plans and IRAs. Note: While the 20% withholding will not be taken from distributions, you will have the option to add withholding if you want.
Distributions will be subject to taxation, and you will have the option to pay taxes due over a three-year period. We suggest you consult with your personal tax advisor.
The act also allows you to reinvest withdrawn funds within three years regardless of that year’s contribution limit, making it easier to replace the amount of your distribution in your retirement account.
Retirement plan loan limits are increased
Maximum retirement plan loan limits have been increased from $50,000 or 50% of vested account balances to $100,000 or 100% of the vested account balance for loans made within 180 days of enactment of the CARES Act on March 27.
If you choose to take a loan, you will be asked to self-certify that you meet the requirements for a coronavirus-related loan.
Visit TIAA.org or call TIAA at 855-400-4294 if you have questions related to taking a loan.
Suspension of required minimum distributions (RMDs)
To help provide relief for those required to take RMDs, the CARES Act allows you to cancel your 2020 RMD payments and restart them in 2021.
If you already have an RMD payment scheduled for this year:
- You have the flexibility to cancel it, and TIAA will restart it automatically in 2021.
If you have already started receiving your RMD this year:
- You have the option to repay it as a rollover. If checks have already been sent, you have 60 days to roll over those funds into a plan that accepts rollovers or into an IRA.
If you have not set up your RMD this year:
- Based on the CARES Act, TIAA cannot set up new RMD payments. If you still need the money, you can take a withdrawal. The quickest way to set that up is through the TIAA website; be sure to set up an electronic funds transfer (EFT).
Other changes to consider
Tax filing and payment changes
The Treasury has extended federal tax filing and IRA contribution deadlines. The federal deadline for filing a 2019 tax return—and any corresponding 2019 IRA contributions outside of your retirement plan—has been extended to July 15, 2020.
If you meet the eligibility criteria detailed above, would like to speak to a financial consultant, or would like to request loans or distributions, you can do so by logging in to your online account at TIAA.org or calling TIAA at 855-400-4294. You can also visit TIAA.org for more information on the provisions of the CARES Act and other changes to consider. We recommend reviewing all of your options prior to making a decision.