CARES Act 401(k) Resource Center
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From our blog
Frequently Asked Questions
How long do employees have to take advantage of these new provisions?
The CARES Act provisions currently expire on Sept 23, 2020 for loans and December 31, 2020 for distributions.
Does the CARES Act requirement for adverse financial consequences include pay cuts from the current employer?
Yes, adverse financial consequences generally include lost income from pay cuts, reduced hours, furloughs or layoffs.
Do employees have to provide documentation to prove that they have been impacted by COVID-19? If so, what?
While the CARES Act does not provide explicit documentation guidelines, most providers have adopted the view that employees simply need to “self-certify” that they meet the requirements.
A prudent self-certification process should:
(a) Have the employee attest to the specific reason they qualify for the distribution
(b) Document the steps the employer takes to verify what they can
For example, if an employee claims that they were sick with COVID-19, the employer does not need to demand to see the test results. Rather, the employer may rely on the employee’s attestation that they tested positive with a CDC-approved test. However, there may be some claims that, on their face, do not qualify. For example, if an employee were to self-certify that they lost their job, the employer should reasonably be expected to verify that the employee was in fact terminated. We recommend that employers develop, document and consistently apply a standard process for reviewing and approving these distributions.
What if an employee can’t get a test to prove they have COVID-19?
Currently, employees must have tested positive using a CDC-approved COVID-19 test to qualify for the new distribution benefits. However, given the challenges of receiving a COVID-19 test, we hope that subsequent guidance from the IRS may loosen these standards.
Can loss of income include the loss of a spouse's income, due to COVID-19?
No, for the purposes of qualifying for a distribution under the employee's plan, it cannot. The employee should reach out to the spouse's HR team to understand which CARES Act provisions the spouse’s employer will be supporting.
Can retirees that are still in the 401(k) plan take out a loan?
Generally, no. Most plans do not allow employees that have retired or been terminated to take out a loan.
