New options for accessing money in your retirement account

April 8, 2020 9:00 PM

Many working people are struggling to make ends meet during the Coronavirus crisis and may need to access their retirement savings to get by.

On March 27th, 2020, the Federal government passed the Coronavirus Aid, Relief, and Economic Security Act, or “CARES Act”. The CARES Act includes new options for individuals to withdraw money from their retirement account during the crisis.

Early Withdrawals under the CARES Act:

If you participate in the Industry Plan 401(k) or Division A Annuity Fund (401(k)), you can now take a distribution from your 401(k) of up to $100,000 from your account balance without an early distribution penalty.

Do I qualify to make an early withdrawal?

Under the CARES Act, you are eligible to withdraw a distribution from your 401(k) if:

You have been diagnosed with COVID-19
Your spouse or dependent has been diagnosed with COVID-19
You have suffered financial consequences as a result of being quarantined, furloughed, laid off, or had hours reduced; and/or,
You have lost income for other qualifying reasons due to the crisis (including having to stay home to provide childcare)

How much money can I withdraw?

You can withdraw up to a total of $100,000 or 100% of the retirement account balance (capped at $100,000) – if you take multiple withdrawals the cap applies to combined total of all withdrawals.

Do I have to pay penalties or taxes on this withdrawal?

Normally, when you withdraw money from your 401(k) before the age of 59 and 1/2, you are required to pay a 10% penalty. The CARES Act has waived this 10% penalty.
Your financial institution will withhold 10% for taxes unless you opt out and receive the full amount. You will still have to pay taxes on this withdrawal.

Can I repay my 401(k) once I am working again?

You can repay the money you withdrew from your 401(k) over the next 3 years from the date you take it. The withdrawal will still be included in your taxable income over the next 3 year period, unless you elect to have the entire distribution taxed in the year of the distribution.

How do I take advantage of these changes?

If you are a participant in the Industry Plan 401(k), you can contact Principal at (800) 547-7754 or go online at Principal.com. The Pension Department is also available to assist between 9:00 AM - 5:00 PM at (212) 586-6400; ext. 4125.

If you are a participant in the Division A Annuity Plan (401(k)), contact (212) 492-2136 and we will assist you in filling out the form to receive a distribution.