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Distributions

The Federal government has waived the mandatory 20% federal withholding on the CARES Act eligible distributions as well as waiving the 10% early withdrawal penalty.


Please note- The participant needs to "elect" to not have any federal taxes withheld.


In order to use the CARES Act rules for the no 10% penalty the member must “certify that the member satisfies the conditions of –“who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to child lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury. “


The IRS will be requiring the Plans to have the "certification" in order to put the proper code on the 1099R.


The application must have the certification on it- making it a separate part for example:


I certify that I am “A qualified individual as defined below:

“A qualified individual is an individual who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury. (Act Sec. 2202(a)(4)(A)(ii))”

It is a self–certification, meaning it does not have to be notarized or witnessed, but it must be signed by the member.


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