The CARES Act created a new withdrawal type, coronavirus-related distributions, and waived the 10% early withdrawal penalty for coronavirus-related withdrawals from a retirement plan or IRA, provided certain conditions are satisfied:
- The aggregate amount received by an individual does not exceed $100,000, AND
- Issued to a “qualified individual” (see “Who is eligible to take a coronavirus-related distribution?” for details)
Additionally, when withdrawn from a workplace retirement plan, coronavirus-related distributions from retirement plans won’t be subject to a 20% mandatory withholding and the 402(f) special tax notice requirements do not apply. Coronavirus-related distributions are subject to ordinary income tax. This special treatment is extended to any distribution already taken prior to enactment of the new law (but not before January 1, 2020).