This correspondence is intended to summarize and share our perspective on how the first three (3) phases of Federal Coronavirus (COVID-19) stimulus measures impacts how RMR Wealth Builders, Inc. administers personal client and business customer accounts, to summarize the provisions we believe are most important to you and your business and to highlight options and opportunities that we think may be valuable in conversations with you as we help you navigate this crisis and find your footing for success once we begin to emerge.
While not an exhaustive list, it is meant to capture those essential points we believe are most relevant to you and your business.
Please note, sections in italics are commentary regarding how we will be responding to select items.
When we use the term “personal clients” we are referring only to direct individual customers of RMR.
If you are a Participant in an employer sponsored 401(k) or other retirement plan, please refer to the Corporate Customer sections below.
Here we go!!!
As was the case following 9/11 , and during the Great Recession, our President and Congress have managed to bridge partisan divides and quickly develop several legislative packages to address the expanding impact of the coronavirus (COVID-19) on America’s public health system and the broader economy. Phase 1: The supplemental appropriations bill; Phase 2 (Families First Coronavirus Response Act – “FFCRA”): Targeted relief for individuals, including paid family leave; and Phase 3 (Coronavirus Aid, Relief, and Economic Security Act – “CARES”): Broader economic stimulus designed to deliver cash to individuals and small businesses to help them weather the downturn, as well as industry-specific relief. Following is an overview of some of the key provisions we believe most impact our clients and customers along with our thoughts and considerations for those of you considering how to make practical and effective use of the provisions and tools these Acts provide:
IRA Owners, Retirement Plan Participants, & Plan Sponsors:
- Retirement Plan & IRA Distributions:
a. Exemption from the 10% early withdrawal penalty on up to $100,000 in distributions from Retirement Plan’s and IRAs.
b. 401(k) plan distributions are not subject to 20% mandatory tax withholdings.
c. You can repay your distributions from an IRA or 401(k) over three (3) years.
d. Income Tax on the distributions may be spread evenly over three (3) years.
- Retirement Plan Loans:
a. Maximum loan amounts are increased to up to 100% of the vested balance with a maximum limit of $100,000. This only applies to loans made on or before September 23, 2020 (180 days following enactment of CARES).
b. Existing loan repayments due from March 27, 2020 through December 31, 2020, may be delayed for up to one (1) year. Interest continues to accrue during the period and the plan can extend the term of the loan for up to one (1) year.
• Required Minimum Distributions (RMD’s):
a. RMD’s for both individually owned and beneficiary IRAs are waived for 2020.
b. The RMD waiver does NOT apply to Defined Benefit plans.
c. RMD’s from an IRA/Beneficiary IRA that were already taken may be returned within 60- day window (a return is only allowed once per twelve (12) calendar months).
Personal Clients: We will be evaluating your accounts and providing reporting and options to your RMR Advisor regarding your RMDs. Your Advisor will be reaching out to you directly if they determine any changes to your plan may be necessary. Otherwise, if you have specific questions regarding your accounts please reach out to your Advisor directly to discuss. We ask for your patience and grace as we process the influx of change requests that will be generated as a result of the legislation. If you require a distribution from an account with RMR please call our Operations Team or your RMR Advisor to fulfill your request. NOTE: Our compliance process requires we verbally verify all distribution requests to ensure the safety of your balances from theft and will not process requests received via email or voicemail. If you are unable to reach us by phone, feel free to share the details of your request along with your contact information by voice mail and/or e-mail and we will reply back to you as soon as possible to review and confirm your instructions in-person. DO NOT TEXT US.
Corporate Clients: Retirement plan vendors, record keepers and administrators are all working diligently to make the necessary updates and modifications to their systems, documents, and processes to accommodate these legislative changes. We expect challenges – early on - in processing many of the participant requests. We ask for everyone’s patience and grace while we work through your requests. NOTE: There is no mandate for retirement plans to offer the expanded distribution or loan options legislated; plan sponsors may elect to decline them. However, if it is your intention to provide this flexibility to plan participants, you may communicate with your participating employees to begin utilizing them once your record-keeper and plan administrator are prepared to process and administer requests. If you select this path, the plan must be formally Amended – retroactively - to allow these new provisions no later than the last day of the first plan year beginning on or later Jan 1, 2022. If RMR is your retirement plan advisor, we will notify you as your respective vendor, record keeper and administrator is prepared to support these new processes.
2019 Tax Deadlines
- 2019 Federal income Taxes have been moved from April 15th to July 15th, 2020.
- In addition, July 15th, 2020 will also be the deadline for IRAs and Health Savings Account (HSA) contributions for 2019 tax year.
- All employer contributions to Defined Contribution plans (I.e.: 401(k), Profit Sharing and Money Purchase plans) should still be made prior to the filing of the corporate tax returns for the year in which they are being deducted.
Personal Clients: Please work with your RMR Advisor or our Operations Team with regards to funding your 2019 tax year contributions to your personal accounts. We ask, wherever possible, that you fund your accounts via Electronic Funds Transfer (EFT) instead of Personal Checks. This allows us to more efficiently process your requests and reduces risk for our staff in public to visit our offices to collect and process mail.
Direct Payments to Individuals
- The CARES Act includes direct payments to Americans of $1,200 for individual filers, or $2,400 for joint filers, plus $500 for each child under 17.
- The amount of the payments will be reduced based on 2018 or 2019 reported income. As a single tax filer, the reduced amount begins at an adjusted gross income (AGI) of $75,000 per year and completely phases out at $99,000. For joint return filers, the reduced amount begins at $150,000 and payment is eliminated at $198,000.
- NOTE: If you believe you are eligible for a CARES Act stimulus payment, our understanding is:
o You must file your taxes for 2019 if you have not done so previously and you should enter the routing and account numbers for the bank where you want your refund deposited to receive the Stimulus payment.
o If you have previously filed taxes for 2019 and 2018 and provided direct deposit information, your stimulus payment should be deposited directly to the account where you received your last tax refund within three (3) weeks of the date of the signing of the Act, otherwise you will receive a check at an unspecified later date to the address on your filing. This being said, it is very possible this takes longer for the government to process your deposit so patience, please.
Paid Sick & Family Leave, & Unemployment
• The changes in this area are complex and also impacted by benefits and related changes to similar benefits that may already be available at the state level. In order to assist in understanding the rule changes and how to apply for coverages we have provided some select links below:
o Unemployment Benefits Finder
o United States Department of Labor
o New York State PAUSE
o New Jersey DLWD
• Student loan borrowers with Federal Student Loans will have their payments suspended until September 30th, 2020.
• On March 13th, 2020, the President announced that interest would be waived on federal student loans. Legislation codifying that order is retroactive to March 13 lasting to September 30th, 2020.
• The missed months of payments will be recorded as if the borrower had made a payment for the purposes of loan forgiveness programs.
• Employers may also exclude loan repayments from compensation under a tuition reimbursement program (under §127) up to $5,250 in employer payments to employee (or lender) prior to January 1st, 2021. This includes principal or interest payments, tuition, fees, books, etc... and is only effective for payments made after the date of enactment (3/27/2020).
• Learn more at Studentaid.gov or contact your lender directly.
Employer Loan Programs
• Paycheck Protection Program (PPP) – SBA Site and Treasury Site:
o PPP loans are available from an existing SBA lender or through any federally insured depository institution, federally insured credit union and Farm Credit System institution that is participating
o The program, backstopped and guaranteed by the SBA, authorizes up to $349 billion in forgivable loans to small businesses to pay their employees and to cover most mortgage interest, rent and utility costs under structures/leases/agreements incurred/in-force/for which service began before February 15th, 2020 over the eight (8) week period after the loan is made so long as employee and compensation levels are maintained by the
o All loan terms will be the same for every applicant. Because these loans are available through SBA lenders, we suggest discussing this with your banking relationship and a competent, qualified tax advisor.
• Economic Injury Disaster Loan:
o The SBA’s Economic Injury Disaster Loan (EIDL) Program provides small businesses and non-profits with low-interest loans of up to $2 million that can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing due to COVID-19.
o COVID-19 EIDL site
• SBA Debt Relief:
o SBA will be making principal and interest payments on your behalf and to your benefit for six (6) months starting April 2020. This is payment relief and payment forgiveness under the CARES Act. These six (6) payments do not need to be repaid by you now or in the future.
o You are welcome to remit extra payments to SBA lender during the next six (6) months to pay the loan down faster, but you are not required to.
Our summary scratches the surface of what Phase 2 and 3 have provided. There are other changes such as delayed payment of employer payroll taxes, relaxation of business interest deduction limits, pension funding delays, charitable deductions, and more that we have not covered here that may impact your personal or business finances.
Administratively, many of these changes will pose major challenges at the federal, state, local and vendor level to reprogram systems to accommodate and administer these programs in such short order so if you plan on taking advantage of these opportunities it is possible there may be a slow turn around and/or difficulties completing your requests.
Because each persons and businesses situations are unique, we encourage you to contact your RMR Advisor and consider engaging with one of our qualified and credentialed financial planners before making any decisions. By working with RMR to weigh the risks, costs and benefits of utilizing these new resources and programs we can help you prepare a roadmap to help you through this uncertain time with the goal of optimizing your situation today, and establishing a strong foundation for managing and rebuilding for the future.
Of course, we will continue to share relevant information as it becomes available. Until then, please, seek qualified professional advice, temper your actions with wisdom, remain prepared, remember those in need and stay safe and healthy. We look forward to seeing you – in person – some-day soon.
RMR Wealth Builders, Inc