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13 FAQS about retirement plans and distributions under the CARES Act
13 FAQS about retirement plans and distributions under the CARES Act
The Coronavirus Aid, Relief, and Economic (CARES) Act includes provisions related to retirement plans and distributions. Here is what you need to know about this aspect of the law.
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1. HOW DOES THE CARES ACT AFFECT RETIREMENT SAVINGS?
The CARES Act may affect your retirement in several different ways, depending on the type of retirement account you have and your circumstances. The biggest changes that the CARES Act makes to retirement plans and their distributions include: • Waived penalties on retirement withdrawals • Increased retirement plan loan amounts. • Suspended required minimum distributions (RMDs). There are also changes to how charitable contributions affect your tax and retirement plan.
2. CAN I WITHDRAW FUNDS FROM MY RETIREMENT SAVINGS DURING THE PANDEMIC WITHOUT PENALTY EVEN IF I AM NOT YET 59 ½?
Yes, if you meet certain requirements and your plan sponsor adopts the CARES Act provisions authorizing penalty-free distributions.
a) Maximum amount of withdrawal. The CARES Act lets you withdraw up to $100,000 or 100 percent of your vested balance (whichever is less) from retirement accounts, including 401(k)s and IRAs without paying a 10% earlywithdrawal penalty if you are younger than 59 ½.
b) Coronavirus-related distribution. You must meet one of the following conditions to receive this benefit: • You, your spouse, or a dependent has been diagnosed with COVID-19. • You have suffered financially because of the pandemic, such as losing time off work because of a quarantine, being furloughed, having your hours reduced, being unable to work because of childcare obligations with a school closed, or some other similar condition that is outside your control.
c) Timing of distribution. You may make a single withdrawal or multiple distributions that total up to the maximum amount. The penalty waiver applies only to distributions taken during 2020.
3. IF I TAKE FUNDS FROM MY RETIREMENT SAVINGS DURING THE PANDEMIC THAT QUALIFY FOR A PENALTY-FREE WITHDRAWAL, HOW WILL I BE TAXED?
A penalty-free withdrawal during 2020 is not subject to 20% mandatory federal tax withholding when the funds are distributed. However, the distribution is still subject to income tax as it would be for a typical distribution, but this tax liability can be spread across three years. How your withdrawals are taxed depends on whether you contributed funds after you were taxed on them or before you were taxed on them. For pretax contributions, the entire distribution is taxable–your contributions, any amounts that your employer matched, and the earnings on your account are taxable. For post-tax accounts, only the earnings on your account are taxable. You will also have the option to re-contribute the funds to your retirement account during the three years following the distribution to minimize some or all of the tax liability associated with your distribution. The repayments are not counted toward annual contribution limits.
4. WHAT DO I HAVE TO DO TO PROVE THAT I QUALIFY FOR PENALTY-FREE RETIREMENT WITHDRAWAL UNDER THE CARES ACT?
If you make a COVID-19 retirement withdrawal, you will self-certify that you meet the eligibility criteria.
5. HOW DOES THE CARES ACT AFFECT A LOAN FROM A 401(K) OR OTHER QUALIFIED PLANS?
The maximum loan amount has doubled from $50,000 to $100,000 or 100% of the worker’s vested account balance, whichever is less. The maximum amount is reduced by any other loans outstanding in the last twelve months. Plan sponsors can impose lower limits. To qualify for the higher loan limits, you, your spouse, or a dependent must have been diagnosed with COVID-19 or you must have suffered financially because of the pandemic. The change applies to loans made from March 27, 2020 through September 22, 2020. The change is not automatic and not all retirement plans allow for loans. Loans from IRAs are not permitted.
6. CAN I DELAY REPAYMENTS OF AN EXISTING LOAN FROM A 401(K) OR A QUALIFIED PLAN?
You can suspend existing retirement plan repayments due between March 27, 2020 and December 31, 2020 for up to one year if you, your spouse, or a dependent has been diagnosed with COVID-19 or you have suffered financially because of the pandemic. Check with your sponsor or go to your retirement account portal and select the option to view or modify your loan. If you have more than one loan, you will likely have to repeat this process for each loan.
7. SHOULD I USE THE CARES ACT TO DIP INTO MY RETIREMENT SAVINGS?
Even if you can dip into your retirement savings, this does not necessarily mean that you should. You will have to con-sider several factors to determine whether it is a good idea to dip into your retirement savings, such as the following:
• Whether you will be eligible for the waived early withdrawal penalty if you take a distribution.
• How much savings you might lose in lost compound interest
• How much financial assistance you need.
• The tax effects of taking an early distribution.
• Whether you will be able to re-contribute the funds.
• If you take a loan, whether you will be able to repay it. Usually, you have five years or six if you have a coronavi-rus-related hardship.
• The tax effects of failing to repay the loan. If you don’t repay the loan, the unpaid portion is taxed as a distribution.
• Whether you have other options to help you with financial distress.
8. IS MY RETIREMENT PLAN REQUIRED TO ADOPT THESE CARES ACT CHANGES TO DISTRIBUTIONS AND LOANS?
No. These Cares Act provisions are optional. Individual employers must adopt the changes and some of them are taking longer than others. Your plan doesn’t have to permit them even if they already offer hardship withdrawals or loans. Some plan sponsors report that they do not plan to adopt any CARES Act provisions related to retirement plan loans and distribu-tions and others may only implement some of these provisions. You’ll need to check with your plan to see what is available.
9. DO I STILL HAVE TO TAKE REQUIRED MINIMUM DISTRIBUTION (RMD) FOR 2020?
The CARES Act lets you cancel your required minimum distributions for 2020. Your RMDs may automatically restart in 2021. This change affects the following types of retirement plans:
• 401(a).
• 401(k).
• 403(a).
• 403(b).
• 457(b).
• IRA.
• Inherited retirement accounts.
Canceling your RMD for 2020 will not require you to take two RMDs in 2021. Instead, you can simply avoid taking out the distribution, which lets you keep more money in your retirement account and not be subjected to additional tax liability. This provision is particularly important because of the extreme market volatility that has arisen since the spread of COVID-19. That being said, retirees who want to take their RMDs in 2020 still can; they just aren’t required to. This also allows indi-viduals to complete a Roth conversion since they will not be required to receive their RMDs before doing the conversion.
10. HOW DO I CANCEL SCHEDULED RMDS?
In most situations, RMDs will not be automatically canceled, so you will need to contact your plan sponsor to cancel. Many providers are including a simple option on their websites for this purpose.
11. WHAT CAN I DO IF I ALREADY RECEIVED MY RMD THIS YEAR?
If you already received your RMD for 2020, you can repay it into an eligible plan. However, you only have 60 days after receiving the RMD to take this action.
12. DOES THE CARES ACT AFFECT CHARITABLE CONTRIBUTIONS?
The CARES Act affects charitable contributions, which may be part of your overall retirement and estate plan. Under the CARES Act, you can make a qualified charitable distribution of $100,000 or less from your IRA to a qualified charity this year. This distribution would not be treated as taxable income for you. However, if you do not take an RMD, this gift will not offset the tax liability on the RMD. Individuals who do not itemize their deductions can receive a deduction of up to $300 for cash contributions they make to charities in 2020. This is an above-the-line deduction, so you can include it even without itemizing. There are also changes to the limits on charitable contributions. Typically, individual limits for people who itemize their deductions are maxed at 60% of the person’s adjusted gross income. However, this limit is suspended for the year. Corporations are typically limited to 10% of their taxable income on their charitable contributions, but this has been raised to 25% for the year.
13. WHERE CAN I FIND OUT MORE?
You should check with your employer and plan administrator to see what options are available to you. There are many complex aspects of the changes, so you must understand your options and the repercussions of retirement plan distributions or loans. A financial or tax advisor or consumer rights attorney can also assess your situation and provide you with legal advice tailored to your particular situation.
The period between Memorial Day and Labor Day is historically the most dangerous time of year for teen drivers. Some research shows up to 30% of all teen driving fatalities occur during the summer months. Teen drivers lack experience, and the summer months provide multiple reasons for increased risk. Not only is there more daylight and warmer weather, but most teens are out of school and have more free time to be behind the wheel. Here are five safety tips for your teen driver to practice, not just in the summer months but all year long. 1. Avoid Distraction . Research shows as high as 60% of all teen vehicle crashes involve driver distraction. One common misconception is that cell phones are the number one cause of distraction for teen drivers but that is actually not the case. Other passengers create more distractions for teen drivers than any other source. 2. Buckle Up . It is discussed so often that it may seem trite but seatbelt use is proven to reduce fatality rates in motor vehicle accidents. but data shows buckling up can reduce the risk of fatal injury by as much as 45%. 3. Impaired Driving . As high as 15% of all teen driving fatalities involve a blood alcohol content of more than twice the legal limit. 4. Limit Passengers. Most states, including Alabama, have graduated license laws restricting the number of passengers in vehicles operated by teen drivers. Literally all available data associates fewer passengers with lower fatality rates in motor vehicle accidents involving teen drivers. 5. Reduce Nighttime Driving. The fatal crash rate of 16-19-year-olds is nearly 400 times higher at night than during the day.
Identity theft affects millions of people each year and can cause serious harm. Protect yourself by securing your personal information, understanding the threat of identity theft, and exercising caution. Here are 10 things you can start doing now to protect yourself and your loved ones from identity theft: Protect your Social Security number by keeping your Social Security card in a safe place at home. Don’t carry it with you or provide your number unnecessarily. Be careful when you speak with unknown callers. Scammers may mislead you by using legitimate phone numbers or the real names of officials. If they threaten you or make you feel uneasy, hang up. Create strong, unique passwords so others can’t easily access your accounts. Use different passwords for different accounts so if a hacker compromises one account, they can’t access other accounts. Check out the Federal Trade Commission’s password checklist for tips. Never give your personal or financial information in response to an unsolicited call or message, and never post it on social media. Shred paper documents that contain personal information, like your name, birth date, and Social Security number. Protect your mobile device from unauthorized access by securing it with a PIN, adding a fingerprinting feature, or using facial recognition. You can also add a password and adjust the time before your screen automatically locks. Regularly check your financial accounts for suspicious transactions. You can also request and check a free credit report from each of the three credit bureaus every year: TransUnion , Equifax , and Experian . Avoid internet threats by installing and maintaining strong anti-virus software on all your devices—including your mobile device and personal computer. Use a virtual private network (VPN) to stay safe on public Wi-Fi. Do not perform certain activities that involve sensitive data, like online shopping and banking, on public Wi-Fi networks. Protect yourself on social media by customizing your security settings and deleting accounts you no longer use. Also, double-check suspicious messages from your contacts, as hackers may create fake accounts of people you know. Never click on any link sent via unsolicited email or text message—type in the web address yourself. Only provide information on secure websites.
Every accident case is different. Some settle more quickly than others. However, it is not uncommon, for a personal injury case to take a year or more to resolve after the case has been filed in court. Evaluating the Injury Prior to filing a lawsuit, it takes time to determine the full extent of your injuries. Doctors are often unable to give an opinion about the seriousness of an injury until your condition has stabilized. In serious injury cases, it may even take a year after the accident before your doctor can say whether or not your injuries are permanent. It is extremely important to take the necessary time to fully evaluate your injuries. You have only one chance to prove the extent to which you have been harmed. Once you accept a settlement offer, that decision is final. You cannot go back and ask for more money if you later find out your injuries are more serious. An experienced personal injury attorney knows how to keep your case moving through the legal system. Your personal injury case may move through these stages: 1. Written Discovery The written discovery period can last over six months. You will be asked to answer written questions (interrogatories) under oath. You will also be asked to produce documents or authorize others to produce documents such as accident reports and medical records. 2. Depositions During a deposition, you will be asked questions under oath. A court reporter types a record of everything that is said. Not only will you be questioned about the accident and your injuries, you will be asked questions about what your health, education, and work were like before the accident. 3. Mediation and Settlement The Court almost always requires a settlement conference or mediation before personal injury cases can go to trial. At mediation, a neutral trained mediator goes over the issues and evidence with the parties to help guide them toward a settlement agreement. 4. Trial If your case does not settle and goes to trial, a jury decides what your injury is worth. It can take eighteen months or longer to get the trial scheduled. Once the trial is over, there may be further appeals and motions. It's possible for the parties to settle the case during trial or even after trial in order to end an appeal. Your best strategy is to contact an attorney with experience in handling personal injury cases. Your attorney can give you an estimate about the length of time it takes to resolve your type of case. Also, ask your attorney to give you frequent reports on the status of your case so you know that your case is making its way through the legal process. It's understandable that you may be frustrated at the speed your case seems to be moving. However, you should never rush to take the first settlement offer made by an insurance company. The first offer is rarely your best settlement offer. .
Distracted driving has been on the increase for the last several years and continues to be one of the leading causes of vehicle accidents throughout the United States. If you are texting and driving down the highway at 55 mph, that’s like traveling the length of a football field with your eyes closed. You can only drive safely when your full attention is on the road. Any activity that isn’t related to driving is a potential distraction and increases your risk of a collision. While most research points to a mobile phone as the number one culprit, it is far from the only activity potentially stealing a driver's attention. Eating or drinking, grooming, radios, other passengers - especially children, and even pets can also be significant factors. Distracted driving accidents are preventable 99% of the time. Driving can become mundane at times, but we all must remember when driving we have an obligation to the safety of not only ourselves but those who ride with us and other drivers we share the road with. Some studies show listening to podcasts or certain types of music can enhance our concentration. It’s important to practice safe habits behind the wheel. You want to make sure that your passengers know how serious you are about driving without distractions. One of the most effective ways to lead is through example. Be a good example for your friends and family by avoiding driving while you’re distracted.
We see this question all the time. The injured party doesn’t want to use their own health insurance to pay for an injury. They believe it is the responsibility of the person at fault to pay for their medical bills. That may feel like the right position for an accident victim to take but the truth is, most of the time the injured party will end up with a larger settlement if they do, in fact, use their own medical benefits. Here's why; Health insurance companies have a negotiated price for medical services that is about 15 percent less than what people have to pay who don’t have health insurance. If your medical bills are $50,000.00 but Blue Cross Blue Shield pays $15,000.00 and the person who caused the wreck has $50,000.00 in liability coverage, that leaves $35,000.00 available for the injured party versus $0.00. Generally speaking, Blue Cross Blue Shield will reduce the $15,000.00 to $10,000.00 leaving $40,000.00 available. The point is that there’s more money available when you take advantage of your healthcare negotiated rates whether it’s United Health Care, Medicare, Medicaid, or Blue Cross Blue Shield. More money is better. Using your health insurance to pay your medical bills if you are injured, will almost always end up maximizing your settlement.
Once you reach the age of 65 you have many more options than before. As you know if you go on Medicare and you are under the age of 65 your options for health plans are limited. When you turn 65 you will have another open enrollment period to sign up for any plan you wish to get. In other words, just because you are already on Medicare does not prohibit you from having all the options a person not on Medicare and turning 65 would have.
This is one of the questions we get asked the most. In most cases, the answer to this is “no”. When you turn 65, if you are still working and on your employer’s health insurance plan you probably will not need Medicare Part B. I say probably because most employer plans do not file on Medicare if you have a claim. Because you have to pay a premium for Part B, Medicare does not require a person to sign up for Part B as long as you are on your employer’s plan. Also, because the rules can differ for companies with less than 20 employees, the safest thing to do is check with the benefits coordinator at your place of employment for guidance or call us at our office.
Social Security: 3 main reasons why the Government can deny Disability Benefits
For many working Americans, when the unexpected happens and they can no longer work due to a serious medical condition, Social Security Disability Insurance (SSDI) benefits can be a financial lifeline. Most American workers contribute to Social Security through federal payroll taxes. Social Security is designed for income during retirement years however if an individual’s working years are cut short by a severe, long-term illness or injury, they may need income before reaching retirement age. For many who find themselves in these circumstances SSDI provides monthly financial assistance. Seven facts every American should know about the SSDI program 1. SSDI is coverage that workers earn. If an individual has paid enough Social Security taxes through their lifetime earnings, SSDI is intended to provide support by replacing some of their income when they become disabled and unable to work. 2. The Social Security Administration (SSA) has a strict definition of disability. The SSA considers a person disabled if they can’t work due to a serious medical condition that is expected to last at least one year or result in death. SSDI is intended as a long-term solution and is not intended to offer temporary or partial disability benefits. 3. Disability can happen to anyone at any age. Serious medical conditions, such as cancer and mental illness, can affect the young and elderly alike. Studies prove one in four 20-year-olds will become disabled before retirement age. As a result, they may need to rely on Social Security disability (SSDI) benefits for income support. 4. SSDI payments help disabled workers to meet their basic needs. SSDI is not and was never intended to be a full wage replacement. The average monthly Social Security disability benefit is $1,280, as of April 2021, which is intended to allow an individual who has become disabled to meet their basic needs. 5. Social Security works aggressively to detect and prevent fraud. Every American worker who pays federal taxes invests in SSA. The agency is committed to protecting their investment by taking a zero-tolerance approach to fraud. The agency claims a fraud incidence rate that is a fraction of one percent. 6. SSA helps people return to work without losing benefits. Often, people would like to re-enter the workforce. However, many worry they will lose disability benefits if they try working again. They may also fear losing benefits if they are unsuccessful in returning to work. The agency has many programs designed to connect an individual to free employment support services while helping them maintain benefits, such as health care. 7. Millions of disabled Americans depend on SSDI benefits. Nearly 10 million disabled workers and their spouses and children receive benefits through SSA.
A circuit judge in Sarasota ruled Monday that the verdict in a legal malpractice case against the Morgan & Morgan law firm should stand. The judge also denied Morgan & Morgan’s motion for a new trial and another motion to reduce the $5 million award determined by the jury. Attorney Donald St. Denis of St. Denis & Davey in Jacksonville, who represented the plaintiffs in the malpractice lawsuit, said Friday he has a hearing scheduled Tuesday in Sarasota on a motion to award his firm $1.6 million in attorney’s fees and costs. “We’ve been working on this for two years. I’ve got a ton of time in this case,” he said Friday. St. Denis made offers on behalf of his clients in August 2016 and again in January 2017 for $2.5 million and $4 million, respectively, to settle the malpractice suit before going to trial, but Morgan & Morgan’s counteroffer was only $1,000, he said. Morgan & Morgan intends to appeal the jury’s verdict. John Morgan “This case is a long way from over,” John Morgan said Friday in an email response. “We defended this case because we think we are right. And we will continue fighting it because we still believe we are right. We fully expect to win outright on appeal and have a judgment in our favor entered by the appellate courts.” St. Denis represented Shawna and Rock Pollack in the malpractice action related to Morgan & Morgan’s handling of a personal injury case the couple filed after their child was permanently injured during birth. On Oct. 17, a jury in circuit court in Sarasota County found that Morgan & Morgan attorney Armando Lauritano was 100 percent responsible for Shawna and Rock Pollock losing their rights to a medical malpractice claim against a Sarasota obstetrics practice, a nurse midwife and the hospital where their child was born. The case began Nov. 2, 2006, when Shawna Pollock was admitted to Sarasota Memorial Hospital to give birth. After she was given a hormone to induce labor, the unborn infant began to experience slowed fetal heartbeat and Pollock began writhing in pain. By the time an emergency cesarean section was performed, Pollock’s uterus had ruptured, depriving the fetus of oxygen, which caused permanent brain damage. After the birth, the Pollocks contacted Morgan & Morgan. An investigator from the firm met the couple at Ronald McDonald House, where they were staying while their infant son was in All Children’s Hospital in Tampa. On Feb. 17, 2007, the Pollocks agreed to be represented by Morgan & Morgan. They agreed to pay the firm up to 40 percent of a recovery up to $1 million, 30 percent between $1 million and $2 million and 20 percent of recovery in excess of $2 million. St. Denis argued to the jury that Morgan & Morgan was focused on collecting a large fee for the child’s brain injury claim to the point that its representative failed to provide the required presuit notice of claims for injuries sustained during the delivery by Shawna Pollock, including that she no longer is able to have children. After it became clear that the baby would qualify for no-fault benefits from the Florida Birth-Related Neurological Injury Compensation Association, and after the statute of limitations period for submitting notice the Pollocks intended to seek compensation for their personal loss had expired, Morgan & Morgan withdrew from representing the Pollocks. The jury found that the OB-GYN practice, the nurse midwife and Sarasota Memorial Hospital were negligent in the care of Shawna Pollock. The medical practice and nurse midwife were found by the jury to be liable for $4.5 million in damages and the hospital was found liable for $500,000 in damages, if the Pollocks had not lost their rights to sue for damages. In its $5 million verdict, the jury further found that Lauritano was negligent in his handling of the Pollocks’ interests, that the Pollacks did not freely and intentionally give up their right to seek compensation from the physicians and hospital and that Lauritano was liable for the loss they incurred. original article https://www.jaxdailyrecord.com/article/court-upholds-dollar5-million-malpractice-verdict-against-morgan-and-morgan