Last call for coronavirus-related distributions

Time’s running out on coronavirus-related distributions. CRDs were created under the CARES Act but only for 2020 — technically only through Dec. 30. These are distributions that can be taken from an individual retirement account or company retirement plan by affected individuals, generally due to illness or loss of income resulting from the COVID pandemic. CRDs can also be taken from inherited retirement accounts.

Advisers should review this list of qualifying individuals, and then identify and contact those who may still benefit from taking a CRD before the option expires at year-end. Now it’s use it or lose it.


  Those diagnosed with the virus.
  Those whose spouse or dependents are diagnosed.
Those who experience adverse financial consequences as a result of either the individual, the individual’s spouse or a member of the household being quarantined; being furloughed or laid off, or having work hours reduced as a result of the virus; being unable to work due to lack of childcare; closing or reducing hours of a business owned or operated by the individual due to the virus; having a reduction in pay (or self-employment income) due to the virus; or having a job offer rescinded or start date for a job delayed due to the virus.

A member of an individual’s household is someone who shares the person’s principal residence, which can be a friend, partner, child, elderly relative or roommate. This opens up CRDs to many individuals who may not be sick, but who have suffered financially as a result of the pandemic.

$100,000 LIMIT

Qualifying individuals can withdraw up to $100,000 penalty-free from their IRAs or company retirement plans. The $100,000 is an overall limit per person, not per plan. The withdrawals are still taxable, but the income can be spread evenly over three years, or reported all in one year. That decision can be made next year when the 2020 tax return is filed.

The funds that were withdrawn can also be repaid for up to three years from the day after the distribution. But beneficiaries cannot repay CRD funds, so make sure to let them know that if they are considering taking a CRD.

 “The Green Bay Packers never lost a football game. They just ran out of time.”

       Vince Lombardi, legendary football coach (1913-1970)

While the distribution is exempt from the 10% early withdrawal penalty for those under age 59½, those who are that age or older can also take advantage of this provision. Some people don’t know that. Even though they are not subject to the 10% penalty, they can still take advantage of the three-year income spread and repayment provisions.


Remember that people’s circumstances can change quickly in this environment. You might have a client who didn’t need the assistance or didn’t qualify earlier in the year, but now does, especially in light of the late-year resurgence in COVID cases.

This relief applies to company plans and IRAs, but it’s optional for plans. If the client qualifies for a CRD under the illness or loss of income provisions and needs to access 401(k) or other company plan funds for a CRD, but the plan does not allow the distribution, they may qualify for a hardship distribution. They can withdraw under the hardship provision but treat the distribution as a CRD on their personal tax return. That’s a big difference since hardship distributions are subject to the 10% early distribution penalty and cannot be repaid like CRDs can.

If you have a client who has both a 401(k) and an IRA and needs to get this done quickly at year-end, then take the CRD from the IRA since that can be done almost instantly, rather that tapping a company plan where there may be processing or bureaucratic delays.


If you have a client who took a required minimum distribution early in the year but didn’t realize that the CARES Act waived RMDs for 2020, it might be too late to undo that RMD, leaving your client with a taxable distribution. However, if the client qualifies for a CRD, they can treat that unwanted RMD as a CRD and return it roll it back over eliminating the tax bill on the unwanted RMD. The late return is not an issue since CRDs can be returned within three years.

[More: 3 mistakes new IRA beneficiaries are making]

For more information on Ed Slott, Ed Slott’s 2-Day IRA Workshop and Ed Slott’s Elite IRA Advisor Group, please visit

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