IRS Issues Much-Needed Guidance on CARES Act Provisions

Bowles Rice Labor and Employment e-Alert
IRS Issues Much-Needed Guidance
on CARES Act Provisions

The IRS just released Notice 2020-50 and Notice 2020-51 with practical guidance on several CARES Act provisions (and one SECURE Act item), including coronavirus-related distributions and plan loans, the definition of "qualified individual," cancelation of certain executive non-qualified elective deferrals, and required minimum distributions. The highlights are summarized below.


No need to investigate participant self-certifications, unless employer already has "actual knowledge." IRS Notice 2020-50 provides assurance that employers/plan sponsors can rely on self-certification that a participant meets the requirements for a Coronavirus-Related Distribution ("CRD") under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), without conducting an independent investigation. The Notice provides that the requirement that an employer not have "actual knowledge," which is contrary to an individual's self-certification, does not mean the employer has an obligation to inquire or independently investigate. Instead, "actual knowledge" is limited to situations in which the employer already possesses sufficiently accurate information to determine the veracity of a self-certification.

A sample "Certification" is provided in Notice 2020-50 for retirement plan participants to use to self-certify that they meet the criteria for a Coronavirus-Related Distribution.

Recontributions of Coronavirus-Related Distributions. Notice 2020-50 also clarifies that 1099R reporting is needed even if the participant recontributes the entire CRD to the same retirement plan in the same year. In accepting recontributions of CRDs, employers must "reasonably conclude" that the recontribution is eligible for direct rollover treatment under the CARES Act. The Notice again provides that with respect to recontributions, employers may accept self-certification that the participant satisfies the requirements of a "qualified individual" (in determining if a distribution is a CRD), provided the employer does not have "actual knowledge" otherwise.

Notice 2020-50 includes a "safe harbor" for compliance with the complex CARES Act rules for suspensions of plan loan payments, extensions of plan loan terms and re-amortizations. Employers and their third-party administrators will be relieved to know that the Notice includes an example of how the suspension of payments, resumption of payments and re-amortizations work in practical terms, under the "safe harbor." The Notice also confirms that employer reliance on self-certification by employees as to their status as a "qualified individual" extends to their eligibility for a coronavirus-related loan. (This had been presumed but is now confirmed.)

Notice 2020-50 expands the categories of "qualified individuals" who may be eligible for coronavirus-related distributions or coronavirus-related loans, adding the following:

An individual whose pay or self-employment income is reduced due to the pandemic, or has had a job offer rescinded or a new job's start date delayed;

An individual whose spouse (or member of the individual's household) has suffered any one of the following effects due to the pandemic:

  • Been quarantined, laid off, or furloughed; had hours reduced; or had pay or self-employment income reduced;
  • Been unable to work due to lack of childcare; or
  • Had a job offer rescinded or the start date of a new job delayed.

An individual whose spouse (or member of the individual's household) has closed or reduced the hours of a business owned or operated by the spouse or household member due to the pandemic.


Executive Non-Qualified Deferred Compensation Plans may allow executives to cancel elective deferrals, or may provide for automatic cancelation, in the event the executive has an "unforeseen emergency" or takes a "hardship distribution" as defined in IRC Section 409A regulations and guidance. Notice 2020-50 makes clear that CRDs qualify as hardship distributions for purposes of this type of cancelation.


Transition Relief for RMD Amounts Not Treated as Eligible Rollover Distributions. The Setting Every Community Up for Retirement Enhancement Act of 2019 ("SECURE Act") changes the Required Beginning Date for the start of mandatory "Required Minimum Distributions" or "RMDs." Notice 2020-51 provides transition relief for employers who didn't treat certain distributions as eligible for rollover, even though those distributions, due to the change in the Required Beginning Date, were not RMDs.

Extension of 60-day Rollover Period to August 31, 2020. The CARES Act also impacts RMDs, by making 2020 RMDs optional for participants. Notice 2020-51 provides participants with an extension of the usual 60-day rollover period to August 31, 2020, for certain distributions from qualified plans and IRAs, where the distributions would have been RMDs except for the CARES Act. The Notice also provides that such distributions from an IRA can be recontributed, without counting for purposes of the limit of one such rollover per year, as long as the recontribution is made by August 31, 2020.

Sample Defined Contribution Plan Amendment for the new RMD Rules. Notice 2020-51 includes a Sample Amendment, with choices for employers as to certain "defaults" respecting RMDs.

Other guidance and clarifications are given in these Notices, in addition to those highlighted in this alert.

For more information:
For more details on the important guidance in these new IRS Notices, or for assistance with other CARES Act, SECURE Act or benefits questions, please contact a member of the Bowles Rice Benefits Team listed below:

Emily Lambright

Emily Lambright
contact by email

Melody Simpson

Melody Simpson
contact by email

Lynn Clarke

Lynn Clarke
contact by email

Steven Hall

Steven Hall
contact by email

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