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CARES Act Benefits

The Coronavirus Aid, Relief and Economic Security (CARES) Act provides options and enhanced benefits for participants in Chatham's Defined Contribution Plan and Flexible Savings Account (FSA).

Retirement Plan Provisions

Chatham University has chosen to adopt the following CARES Act provisions for our retirement plans:  

  • Penalties and withholding are waived for qualified distributions from retirement plan accounts
  • Retirement plan loan limites have been increased
  • Optional suspension of required minimum distributions (RMDs) for 2020

As always, we recommend reaching out to your TIAA or Fidelity Investments financial consultant to review your current situation–along with short- and long-term financial goals–before making any decisions. TIAA is offering virtual meetings with a local financial consultant.  You can register for a session at www.tiaa.org/schedulenow and any of the financial consultants in the Bakery Square Office will be able to conduct this virtual meeting. You can also call 1-800-732-8353 to schedule a virtual meeting.

We know that keeping you and your family healthy and safe amid the challenges surrounding COVID-19 needs to be your first priority. That’s why we’re working with our retirement plan partners at TIAA and Fidelity Investments to break down the provisions in the act to make them easier to understand so you can determine if they may be right for you.

You are considered eligible to take special COVID-19 related qualified distributions/loans from your retirement plan if any of the below conditions are met: 

  • You have been diagnosed with COVID-19 by a test approved from the Centers for Disease Control and Prevention
  • You have a spouse or dependent who has been diagnosed with COVID-19
  • You suffer financial consequences as a result of quarantine, employment furlough, layoffs, reduced work hours or cannot work due to lack of child care as a result of coronavirus
  • You experience a financial loss to an individually owned or operated business that is caused by a closing or reduction of hours due to coronavirus
  • Other factors as determined by the Secretary of the Treasury or his delegate

Penalties and withholding are waived for qualified distributions from retirement plan accounts

Provided the above eligibility criteria are met, the CARES Act waives the 10% early withdrawal penalty and eliminates the 20% withholding for coronavirus-related distributions of up to $100,000 across qualified retirement plans and IRAs. Note: While the 20% withholding will not be taken from distributions, you will have the option to add withholding if you want.

Distributions will be subject to taxation, and you will have the option to pay taxes due over a three-year period. We suggest you consult with your personal tax advisor with respect to your personal tax situation. 

The act also allows you to reinvest withdrawn funds within three years regardless of that year’s contribution limit, making it easier to replace the amount of your distribution in your retirement account.

Maximum retirement plan loan limits have been increased from $50,000 or 50% of vested account balances to $100,000 or 100% of the vested account balance for loans made within 180 days of enactment of the CARES Act on March 27.

Currently, our plan only allows for three outstanding loans with the voluntary Supplemental Retirement Annuity (SRA) Plan and no loans under the Defined Contribution Retirement Plan with the University match plan.  Effective March 27 with the passage of the CARES Act, we will allow loans for the Defined Contribution Retirement Plan with the University match plan until September 23, 2020.

If you choose to take a loan, you will be asked to self-certify that you meet the requirements for a coronavirus-related loan. The loan approval process will remain the same as it does for non-coronavirus-related loans. 

If you have existing retirement plan loan payments, you may be able to defer payments for one year and extend the term of your loan by one year.

Visit TIAA.org or call TIAA at 855-400-4294 or Fidelity.com or call 1-800-343-3548 if you have questions related to taking a loan or the possibility of deferring payments to an existing retirement plan loan.  Please anticipate delays with the processing of these loans due to the system updates for Fidelity and TIAA.  

For retirement plan distributions and loans, TIAA and Fidelity encourage you to set up electronic funds transfer (EFT) for faster delivery of funds.

To help provide relief for those required to take RMDs, the CARES Act allows you to cancel your 2020 RMD payments and restart them in 2021. 

  • If you already have an RMD payment scheduled for this year:

You have the flexibility to cancel it, and TIAA or Fidelity will restart it automatically in 2021.

  • If you have already started receiving your RMD this year:

You have the option to repay it as a rollover. If checks have already been sent, you have 60 days to roll over those funds into a plan that accepts rollovers or into an IRA. In past disaster scenarios, the IRS has extended that rollover period. TIAA or Fidelity will monitor regulatory activity and notify clients if an extension is granted in this context.

  • If you have not set up your RMD this year: 

Based on the CARES Act, TIAA or Fidelity cannot set up new RMD payments. If you still need the money, you can take a withdrawal. The quickest way to set that up is through the TIAA website; be sure to set up an EFT.  

If you meet the eligibility criteria detailed above, would like to speak to a financial consultant, or would like to request loans or distributions, you can do so by logging in to your online account at TIAA.org or calling TIAA at 855-400-4294  or Fidelity.com at 1-800-343-3548.  You can also visit TIAA.org or Fidelity.com for more information on the provisions of the CARES Act and other changes to consider. We recommend reviewing all of your options prior to making a decision.

 

Flexible Spending Account Provisions

In regards to Chatham's Flexible Spending Account (FSA) benefit, the recently enacted CARES Act has two important and beneficial enhancements. 

Over the Counter (OTC) medications are now also reimbursable without a prescription or doctor’s note. The FDA defines OTC medications as a drug product marketed for use by a consumer without the need of a supervising healthcare professional in order to obtain the drug.

Characteristics for OTC drugs include: 

  • The item or product has an acceptable margin of safety.  
  • The item or product has low potential for abuse/misuse when widely available. 
  • A healthcare practitioner is not needed for the safe and effective use of the product.  
  • The product is labeled adequately (active ingredients, purpose, instructions, warnings, expiration date, storage guidelines, etc.)

While OTC medications are now reimbursable without prescription, nutritional supplements, herbal remedies, and most vitamins are not considered drugs or medication by the FDA. These items are recognized as food and still require a doctor’s note or prescription for reimbursement. 

Documentation for OTC reimbursement 

Though prescriptions are no longer necessary for OTC medications to be reimbursed through the FSA, employees still need to provide documentation to show proof of a valid expense. The documentation should include the date the item was purchased, the cost of the item, and a description of the item. This information is generally provided on a grocery or drug store receipt.

Effective date of change 

The CARES Act was officially signed into law on March 27, 2020. While certain provisions are temporary, the provisions for OTC medications and menstrual products are both permanent and effective retroactively to January 1, 2020.

If you have any questions, feel free to contact our benefits administrator, Reams and Associates at 1-800-673-2518.  

One of the major changes enacted by the CARES Act is the recognition of menstrual care products as medical care. As such, they are now reimbursable via account-based health plans like Flexible Spending Accounts (FSA)  With this law, menstrual care products are defined as tampons, pads, liners, cups, sponges or other similar items used in respect to menstruation.