By Pension and Benefits Editorial Staff
On December 27, 2020, President Donald Trump signed the Consolidated Appropriations Act, 2021, which includes a few provisions affecting retirement plans. The massive bill includes not only the authorization for government funding for the 2021 fiscal year, but also long-awaited relief and economic stimulus legislation related to the ongoing COVID-19 pandemic. The legislation also includes tax extenders and disaster tax relief.
In a provision on the minimum age for plan distributions, a pension plan is allowed to provide that a distribution may be made to an employee who has attained age 59 ½ and who is not separated from employment at the time of the distribution. A lower age, age 55, applies to employees in the building and construction industry. These provisions apply to distributions made before, on, or after the date of the enactment of the bill.
There is a temporary rule for preventing partial plan terminations. It provides that, during any plan year which includes the period beginning on March 13, 2020 and ending on March 31, 2021, if the number of active participants covered by a plan on March 31, 2021 is at least 80 percent of the number of active participants covered by the plan on March 13, 2020, the plan is not treated as having a partial termination.
The bill also includes disaster tax relief for federally declared disaster areas during 2020. The relief includes the forgiveness of early withdrawal penalties under Code Sec. 72(t) for qualified disaster distributions, the recontribution of amounts withdrawn for home purchases, and an increase in the amount of loans from qualified plans. The package of disaster tax relief is essentially the same as is regularly provided in the wake of major disasters like hurricanes or wildfires. However, unlike the disaster-by-disaster approach that is typically taken, this relief generally applies to all declared disasters during the period beginning January 1, 2020 and ending 60 days after the date of enactment of the bill.
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