On March 27, 2020, the federal government enacted the Coronavirus Aid, Relief and Economic Security Act (the CARES Act or Act). The CARES Act is intended to provide economic relief to individuals and businesses facing hardship due to the COVID-19 crisis. It includes various provisions affecting the operation of qualified retirement plans, healthcare plans and fringe benefit plans as part of the relief package and imposes restrictions on compensation to officers and employees of entities that receive stimulus aid under the Act. This Sidley Update provides an overview of certain key employee benefit provisions of the CARES Act.
Summary of Significant Provisions
- allows a new tax-favored retirement plan distribution for COVID-19-affected individuals during 2020
- temporarily increases the amount available to COVID-19-affected individuals for retirement plan loans and extends the payment date for such individuals’ loan repayments due in 2020
- waives 2020 required minimum distributions from defined contribution plans
- delays payment of 2020 required minimum funding contributions to defined benefit plans until January 1, 2021
- permits defined benefit plans to continue using their prior plan year AFTAP for the current plan year for purposes of determining whether any benefit restrictions apply
- expands the types of COVID-19 testing that health plans and insurers are required to cover without cost sharing and without preauthorization
- requires health plan coverage of COVID-19 vaccines and other preventive treatments
- temporarily permits a high deductible health plan to cover telehealth services without satisfaction of minimum deductibles
- permits HSAs, FSAs and HRAs to reimburse for over-the-counter medications without a prescription
- provides an income exclusion for employer payment of student loan repayments during 2020
- restricts compensation paid to highly compensated employees of entities that receive governmental aid under the Act
Sidley Austin LLP provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship. Readers should not act upon this information without seeking advice from professional advisers.
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