On May 4, 2020, the IRS issued Q&As on coronavirus-related distributions and loans from qualified retirement plans, as permitted under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (Pub. L. No. 116-136 (2020); see Legal Update, CARES Act Contains Numerous Employee Benefit and Executive Compensation Provisions, Including Changes to COVID-19 Testing Mandate: Retirement Plan-Related Provisions Under the CARES Act). This Update covers the Q&As addressing:

For a collection of COVID-19 resources, see Global Coronavirus Toolkit.

The Q&As state that the IRS intends to issue guidance on coronavirus-related distributions and loans permitted under the CARES Act. The IRS anticipates that the guidance will be similar to the guidance provided in Notice 2005-92 regarding distributions and loans permitted under the Katrina Emergency Tax Relief Act of 2005 (KETRA).

The Q&As also clarify that employers are not required to provide for the coronavirus-related distributions or plan loans authorized by the CARES Act. Additionally, employers may choose the extent of the relief provided under their plans (for example, allowing coronavirus-related distributions but not plan loans). Individuals may treat a distribution as a coronavirus-related distribution, even if the plan does not, provided the requirements for such a distribution are met.

While the CARES Act allows individuals to repay coronavirus-related distributions during the three-year period after the distribution is received, the Q&As clarify that plans are not required to allow distributions to be repaid. This is because repayments of coronavirus-related distributions are treated as rollover contributions, and plans are generally not required to accept rollover contributions.

The Q&As provide that individuals must report their coronavirus-related distributions on their individual federal income tax return for 2020. Individuals must use Form 8915-E, which the IRS expects to be available by the end of 2020, to report the repayment of a coronavirus-related distribution and determine the taxable income related to the distribution. Taxable income attributable to a distribution may be included in the individual's income either:

Retirement plans that provide coronavirus-related distributions must report the distributions on Form 1099-R, even if the distribution is repaid in the same year. The IRS expects to issue more guidance on this topic.

Qualified retirement plan sponsors and administrators should familiarize themselves with the new Q&As and watch for additional IRS guidance regarding coronavirus-related distributions and plan loans.