During this time of uncertainty, many of our clients, brokers, and customers have reached out for guidance. We will continue to update this page of resources as they become available.

CARES Act Summaries

Congress passes the Coronavirus Aid, Relief,and Economic Security Act (CARES Act)

On March 27, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The CARES Act comes as a continued response to the Coronavirus 2019 (COVID-19) pandemic that is significantly impacting the United States. The Act is a $2.2 trillion economic package that is meant to stabilize individuals and employers, while the nation continues to experience shelter-in-place advisories/orders and hospitals report a surge of severely ill COVID-19 patients. The Act’s Paycheck Protection Program is retroactive to February 15, 2020, which is important for businesses that have been experiencing financial hardships starting in February.

Overview of CARES Act

The CARES Act amends several laws, as well as appropriates funds to assist individuals, families, and businesses that are experiencing financial difficulties due to COVID-19. There are loans available to small businesses for paycheck protection and loan forgiveness, and other assistance for individuals and businesses as it relates to unemployment insurance and tax relief. The Act supports the health care system by providing financial assistance for medical supplies and coverage. It also provides economic stabilization and assistance for severely distressed sectors (such as airlines), as well as additional COVID-19 relief funds, expanded telehealth and COVID-19 testing provisions, and emergency appropriations for COVID-19 health response and agency operations.

HSA and Telehealth Expansion

The CARES Act includes a new safe harbor under which high deductible health plans (HDHPs) can cover telehealth and other remote care before participants meet their deductibles (i.e., without cost-sharing). This temporary safe harbor applies for plan years beginning on or before December 31, 2021, unless extended. As a result of this safe harbor, no-cost telehealth may be provided for any reason–not just COVID-19 related issues–without disrupting HSA eligibility.

Prescription Drug Reimbursement under FSA/HRA/HSAs

The CARES Act allows health flexible spending accounts (FSAs), Health Reimbursement Arrangements (HRAs), and Health Savings Accounts (HSAs) to pay for or reimburse over-the-counter medication and menstrual products without a prescription. This is a permanent repeal of the ACA’s prohibition on reimbursements under such plans for over-the-counter medication obtained without a prescription. This change is effective January 1, 2020.  The IRS may issue further guidance regarding the timing of any necessary plan amendments.

COVID-19 Testing

Under the CARES Act, COVID-19 testing and related services must be offered at no cost-sharing, until the end of the public health emergency, as declared by Health and Human Services. This also means the health plans cannot require prior-authorization or medical management for COVID-19 testing and services (such as an urgent care visit associated with COVID-19). This coverage requirement for COVID-19 testing applies to all health plans, including self-funded and grandfathered plans, and expires at the end of the public health emergency.

Any future COVID-19 vaccine must be provided cost-free, similar to other preventive care vaccines, by any non-grandfathered group health plan, pursuant to the ACA’s preventive care rules.  In addition, the CARES Act requires group health plans and health insurers to cover any “A” or “B” recommended qualifying coronavirus preventive service or CDC-recommended immunization, within 15 business days after the date on which a recommendation is made.  This is a much shorter timeframe than typically allowed for new recommended preventive care services to be added to a group health plan.

The CARES Act also clarifies how plans must pay for COVID-19 testing when performed by an out-of-network provider. Providers who offer COVID-19 testing must post a cash price on their website. Plans may pay out-of-network providers based on their posted cash rate for COVID-19 testing. Providers who do not post the cost for COVID-19 testing face a potential penalty of up to $300 per day. This provision is effective retroactively to March 18, 2020.

Assistance for Businesses – Payroll Protection Program

The Act implements small business loans for employers that have fewer than 500 employees. An employer classified as hospitality and dining under the North American Industry Classification System (NAICS) with multiple locations may obtain loans on a location-specific basis, so particular locations may qualify for a loan. The loans are 100% federally-backed and can be utilized to pay for specific, operational costs. The interest rates for these loans cannot exceed 4%, and no subsidy recoupment or prepayment penalty is permitted. Any small business administration disaster loan admitted after January 31, 2020 can be refinanced into the new loan program. This loan is capped at $10 million, and requires a good-faith certification that: the loans are needed to continue operations during the emergency; funds will be used to retain workers and maintain payroll; pay for mortgage, lease, and utility payments; that there is no other application pending for the same purpose; and that from February 15, 2020 to December 31, 2020 the applicant has not received duplicate amounts. The facts and circumstances should be closely reviewed when applying for and utilizing a small business loan. The Department of Treasury and Small Business Administration is likely to release additional guidance for these applications.

There is also assistance made for larger companies, which provides $500 billion in loans, loan guarantees, and investments for air carriers, cargo air carriers, businesses critical maintaining national security, and facilities that are established by the Federal Reserve to support lending. Loan forgiveness is not allowed for these loans. Again, employers should consult with counsel when availing themselves of these loans, and the Department of Treasury will likely release additional guidance.

Assistance for Individuals

The Act also addresses assistance for individuals and their families who qualify for unemployment benefits. In states that adopt it, an additional federal unemployment benefit of $600 per week is added to what is provided under state law, through July 31, 2020 (unless extended). Individuals unemployed or underemployed due to COVID-19 reasons may also be eligible for an additional 13 weeks of extended unemployment benefits, once state unemployment benefits end.

Additional funding is also available for states that waive the waiting period for unemployment benefits, and states are authorized to enter into agreements with the federal government to initiate short-term compensation agreements to help subsidize payments to employees that have hours reduced due to COVID-19.

Individuals will also be eligible to receive a recovery rebate up to $1,200 ($2,400 for joint filers), including an additional $500 per child. This will phase out for taxpayers making $75,000 or more ($150,000 for joint filers, and $112,500 for heads of household), with the rebate completely phasing out for those earning in excess of $99,000 ($198,000 for joint filers). The rebates will be made available even if a taxpayer had no income, as long as a return is filed. Furthermore, 2018 tax filings will be utilized if filers have not yet filed 2019 taxes. Similarly, there is waiver of taxes for premature distributions of certain accounts, such as retirement and IRAs. Individuals wishing to exercise this waiver will need to confirm it is due to a COVID-19 financial hardship and are urged to consult with a personal tax advisor.

Student Loan Relief

Under the CARES Act, employers may use an educational assistance program to reimburse employees for qualifying student loans up to $5,250 on a tax-free basis (state or local taxes may still apply). This provision applies to loan payments, including principal and interest, made between March 28, 2020 and December 31, 2020, unless extended. Educational assistance programs are subject to Section 127 of the Internal Revenue Code and must be offered pursuant to a written plan document, be communicated to employees, and comply with certain nondiscrimination requirements.

Amendments to Families First Coronavirus Response Act (FFCRA) and Health Benefits

The CARES Act made several clarifications to the FFCRA. For purposes of the expanded FMLA provision, employees will be considered rehired if they were laid off by their employer on or after March 1, 2020, had worked for the employer at least 30 days in the last 60 days prior to layoff, and are rehired. This means that employees that are rehired after March 1 may be eligible for expanded FMLA immediately without having to re-satisfy the 30-day employment requirement under expanded FMLA.  The CARES Act also clarifies that employers can receive advance tax credit from Treasury instead of waiting to be reimbursed.

The CARES Act also expands upon the types of COVID-19 testing that are required to be covered, which include in-vitro testing from any developer that has requested or intends to request emergency authorization from the FDA, or diagnostic tests authorized by a state.


The Act also provides additional funding for other federal departments to help continue to support industries during this time, as well as increase manufacturing and approval efforts for vaccines and other supplies. Likewise, some adjustments (generally technical corrections) were made to the 2017 Tax Cuts and Jobs Act.

What Employers Should Expect Next

We expect additional guidance at the federal level with regard to applying for and receiving a business loan. Further information from the IRS regarding individual payments is likely to be released in the coming weeks. Employers may also refer to state unemployment websites for question regarding unemployment, as many states have been updating consistently in response to the pandemic. In addition, employers need to be cognizant of local and state emergency regulations that may affect how employers in certain industries, such as food services, operate during a public health emergency.

For more information on COVID-19, see:

About the Authors.  This alert was prepared for MWG Employer Services by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act. 

As most of you are aware, on Friday, March 27, 2020, Congress passed sweeping legislation which affects most defined contribution retirement plans. The Coronavirus Aid, Relief and Economic Security Act (CARES Act) is intended to provide relief to those suffering as a result of the Coronavirus pandemic which is affecting our nation.

The information below is intended to help Plan Sponsors navigate the maze of information available. Please share this email with others in your office that may benefit from it. As always, we are here to answer any questions you may have about situations specific to your employees or plan.

The expanded distribution and loan provisions are permissible for plans to offer, but they are not required to be offered. As such, plans must be amended (by the end of 2022) to allow these options. All MWG RPS clients who have adopted our volume submitter document will be amended to include these provisions, unless we are notified in writing by the plan sponsor to the contrary.

Coronavirus-Related Distributions

The bill permits “coronavirus-related” distributions of up to $100,000 without the application of the additional 10% premature distribution tax to a “qualified individual” who meets any of the following criteria:

  • The participant has been diagnosed with the virus (as confirmed by a CDC approved test);
  • The participant’s spouse or dependent has been diagnosed with the virus; or
  • The participant has suffered financially from the pandemic because:
    • The participant was laid off, furloughed, quarantined, or had hours reduced;
    • The participant cannot work due to the unavailability of child care because of the pandemic; or
    • The participant’s own business has had to close or reduce hours.

Future legislation may include other categories of people eligible for a hardship distribution. The Act permits the Plan Administrator to rely on the participant’s certification that s/he qualifies for the distribution.

While the distribution is exempt from the 10% penalty tax, it is still subject to ordinary income tax. Affected participants may spread the taxes over a three-year period, and may repay all or part of the distribution to the affected plan or any plan that can accept rollovers within such period. Such repayment is treated as a tax-free rollover of the funds to the plan and is not adjusted for earnings. Following procedures developed in connection with very similar relief for major hurricanes, participants who repay distributions can file an amended return to recover tax paid on income reported in earlier years.

The coronavirus-related distributions are not eligible rollover distributions, which means that they are not subject to the 20% mandatory withholding on such distributions. Such rules provide for 10% withholding that is waivable by participants (while keeping in mind that taxes will ultimately be due within the three-year window, unless the distribution is repaid as permitted in the law).

Loan Limit Increases and Delays in Repayment

Section 72(p) is modified to permit loans of up to 100% of a qualified individual’s vested account or benefit, up to $100,000. This provision covers loans made by 9/23/20 (180 days from enactment of CARES). Furthermore, any loan payment due on any outstanding loan between the date of enactment and December 31, 2020, is delayed up to one year. The five-year repayment period is also extended for one year. Interest accrues on the loan during the delay period.

This provision only applies to plans that have loans available.

Required Minimum Distribution Requirements for 2020

Required minimum distributions (RMDs) due in 2020 are not required from defined contribution qualified plans, 403(b) plans, IRAs, and governmental 457(b) plans.

If the required beginning date was in 2020 (i.e., initial 2019 RMD delayed until April 1, 2020), and the plan hasn’t already distributed the first RMD, that RMD is waived as well. If the RMD is due to death, the five-year maximum distribution period is determined disregarding 2020.

DOL Authority to Postpone Deadlines

The CARES Act gives the DOL authority under ERISA to delay deadlines due to public health emergencies. This will hopefully give rise to some extensions of Form 5500 filing deadlines.

Remedial Amendment Period Extended to 2022

The plan does not have to be amended to conform to operations that are undertaken under these rules until the end of the 2022 plan year (or such later date as the Secretary of the Treasury provides) and anti-cutback relief is provided, if needed.

The amendment must be retroactively effective and match what was actually done in the interim.

Other Coronavirus-Related Issues

We have received many calls about the ability of plan sponsors to terminate contribution obligations and of participants to get funds out of the plan. We have held off on publishing guidance, as we were hoping that the Treasury and DOL would act to provide some relief. As that relief has yet to materialize, the following is our understanding at this time.

Contribution Requirements for Plan “hard-coded” Profit-Sharing and Matching Contributions

Currently, the normal anti-cutback rules apply for contributions that are “hard-coded” or spelled out in the plan document. Therefore, once participants have fulfilled the requirements to get a contribution, the contribution – at least through such date – is required. This means that 2019-related relief must come from the government. For 2020, if the plan has a last day employment requirement, or if the number of required hours are such that employees have not yet worked a sufficient number to be entitled to a contribution, the contribution can be cut back or eliminated.

Safe Harbor 401(k) Plan Suspension or Modification

Safe harbor contributions can be suspended midyear if one of two conditions apply:

  • The plan provided a notice containing the “maybe not” language at least 30 days prior to the beginning of the plan year, advising participants that the safe harbor contribution might be suspending during the year; or
  • The plan sponsor is operating at an economic loss for the plan year. If the contribution is suspended, participants must be given a 30-day advance supplemental notice (so the contribution requirement continues until 30 days after the notice is given), and the plan must pass ADP testing at year end. If being utilized, the plan will not be able to take advantage of the top-heavy exemption for the year.

We have been asked whether, if things improve, the employer can reinstate the safe harbor during the same year in which it was suspended. There is no clear guidance on this. We are reasonably uncomfortable with doing this if the “economic loss” reason is what caused the suspension to begin with. As the regulations provide that the loss must be for the plan year, the idea of having a loss for a period and not for another period during the year concerns us.

On the other hand, if the plan had a 3% nonelective contribution safe harbor and the reason for the suspension was the “maybe not” notice, and if there was also a “maybe” notice issued, it may be possible to restart the safe harbor later in the year, so long as the safe harbor contribution is provided for the entire year. Again, there is a risk to doing this, and whether to undertake that risk is the plan sponsor’s decision.

There is no question, however, that, if the plan provides for a safe harbor matching contribution, the exit out of safe harbor status will be a one-way trip for 2020.


If a participant does not qualify for the coronavirus-related distribution options discussed above (or if the employer does not want to provide these distributions), then the participant must qualify for a hardship distribution or a termination distribution.

This has also raised questions:

  • Is there a difference between termination of employment and layoffs, furloughs and suspensions? The answer is: it is not clear. The IRS has historically reviewed termination-related distributions on a facts-and-circumstances basis.
  • We will discuss this with each plan sponsor to assess what we believe is the proper treatment in light of the facts of individual situations

Don't Forget About the Partial Plan Termination Rules

A partial plan termination generally is deemed by the IRS to occur when 20% of total plan participants are terminated for reasons other than routine annual turnover. For example, a large fast food operation may experience annual turnover of 30% historically. This would not necessarily trigger a partial plan termination. However, if more than 20% of total plan participants are terminated due to the current state of emergency caused by the coronavirus, that presumably would trigger a partial plan termination.

Partial plan terminations mean that affected plan participants – that is, those who terminate employment – must become 100% vested.

We at MWG Retirement Plan Services are here to assist you in any way we can.  The situation we are in is unprecedented and we will do our best to keep you informed about any additional guidance received from the IRS/DOL.