More Calls for Congress to Provide COVID-19-Related Retirement Plan Relief

COVID-19 Relief, Congress
Industry organizations sent a letter to Congress requesting relief for plan sponsors and participants due to COVID-19.

Hey Congress—a little help, please?

The National Association of Government Defined Contribution Administrators (NAGDCA) today called upon Congress to provide relief to retirement plan participants, retirees, and plan sponsors in response to the COVID-19 pandemic-fueled economic emergency.

NAGDCA, the association for plan administrators and services providers of government-sponsored defined contribution retirement plans, along with 24 organizations representing plan sponsors and service providers to retirement plans covering millions of public and private employees and retirees, sent a letter to the members of Congress March 20 urging them to provide much-needed tax relief to workers who may be unable to work.

“The National Association of Government Defined Contribution Administrators is committed to supporting the efforts of state and local government employers to enable the financial wellbeing of their employees. The economic crisis resulting from the COVID-19 pandemic requires Congress to take action to provide plan participants and retirees the flexibility they need to weather this unprecedented public health and financial crisis,” said NAGDCA Executive Director Matt Petersen.

The letter to Congress includes the following recommendations helpful to government plan sponsors, participants, and retirees:

Streamline loan procedures and liberalize hardship distribution rules

Allow penalty-free qualified distributions and loan modifications for individuals impacted by COVID-19 similar to the relief provided in previous emergencies:

  • Waive Section 72(t) 10% penalty on early withdrawals from retirement plans for individuals who have been impacted by the COVID-19 pandemic. Permit individuals three years to repay the distribution. Permit individuals to include the distribution in income ratably for more than three years.
  • Double the current plan loan limits to the lesser of $100,000 or 100% of the participant’s vested account balance.
  • Allow three years to repay income tax associated with a loan default.
  • Allow individuals who borrow from their plan and have a repayment due during the months following the COVID-19 pandemic to delay loan repayment for up to one year.

Waive required minimum distribution rules

Provide a temporary waiver of the rules for required minimum distribution from defined contribution plans and IRAs for the calendar year 2020; similar to the waiver included in the Worker, Retiree, and Employer Recovery Act of 2008.

“We are encouraged to see that the Senate Finance Republican’s proposal included these provisions and urge Congress to retain them as they negotiate a final package of legislation,” Petersen concluded.

Among the industry organizations signing the letter:

American Bankers Association

American Benefits Council

American Council of Life Insurers

American Retirement Association

Association for Advanced Life Underwriting

Committee on Investment of Employee Benefit Assets

Defined Contribution Alternatives Association

Financial Services Institute

Insured Retirement Institute

Investment Adviser Association

Investment Company Institute

National Association of Government Defined Contribution Administrators

National Association of Insurance and Financial Advisors

National Association of Professional Employer Organizations

Retirement Industry Trust Association

Securities Industry and Financial Markets Association

SPARK Institute

Stable Value Investment Association

The ERISA Industry Committee

SEE ALSO:

Retirement Plan Industry Calls for Coronavirus Relief

Forgo 401k Early-Withdrawal Penalty: WSJ

Brian Anderson Editor

Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.

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