What about participants who had loans outstanding prior to the CARES Act? Is there any reprieve here?

Yes, that’s another good piece of news from the CARES Act. For new or existing loans, any payments that are otherwise due between March 27, 2020 and December 31, 2020, can be postponed by up to a year.  Interest does continue to accrue, but the postponement can extend the otherwise applicable 5-year cap on repayment of non-residential loans. Payments then resume on January 1, 2021, then interest accrued during postponement may be wrapped (reamortized) into the payment to factor in both the additional interest, missed payments, and extended period.

Now, unlike the CARES Act coronavirus-related distribution or loan amount provision, currently there is no industry consensus whether this is an optional or mandatory feature. Treasury guidance will help resolve this question.

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Cetera Retirement Plan Specialists is a third-party administrator and may not offer tax, legal or investment advice. Plan sponsors should consult their own tax, legal or investment professionals.