Can a plan participant or beneficiary claim a 2020 plan withdrawal as a coronavirus-related distribution (CRD) if the plan didn’t adopt this feature?

Yes, even if a retirement plan doesn’t specifically make CRDs available, provided an individual meets the qualification requirements outlined in the CARES Act (see Who is eligible to take a coronavirus-related distribution?) , the favorable tax treatment for CRDs is still available; specifically: 

• waiver of the 10% premature withdrawal penalty
• ability to pay income tax over a three-year period
• option to recontribute the CRD amount to a retirement plan or an IRA within three years

Practically, if a plan didn’t specifically authorize CRDs, this option is only available to those participants and beneficiaries who have a distributable event, such as termination of employment, in-service distribution, hardship, death,  or disability.  Note that if the plan doesn’t allow coronavirus-related distributions, the disbursed amount will be subject to a 20% mandatory withholding at the time of the distribution.

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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.