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Individuals may consider using these retirement plan funds to make student loan repayments until the borrower’s financial condition improves

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Individuals may consider using these retirement plan funds to make student loan repayments until the borrower’s financial condition improves

As of this writing, the CARES Act’s exclusion from income for employer – made student loan repayments is set to expire after 2020

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For plan years beginning after 2018, account earnings and employer contributions may be included in hardship distributions. 56 One disadvantage of taking a distribution from a qualified savings plan is that the withdrawal reduces the amount in the account that is growing tax deferred. 57

Section 2202 of the CARES Act provides expanded distribution options and favorable tax treatment for up to $100,000 of COVID – 19- related distributions from qualified retirement plans to qualified individuals. To qualify for the special treatment, the individual, his or her spouse, or a dependent of the individual must have been diagnosed with COVID – 19 or experienced certain financial or work – related hardships due to COVID – 19 . The distribution can be included in the employee’s gross income over a three – year period and is not subject to either 20% withholding or a 10% penalty. The CARES Act also temporarily increased the limit on nontaxable loans from qualified employer retirement plans to individuals who meet the same COVID – 19-r elated criteria discussed above. Further discussion of these changes is beyond the scope of this article.Read More »Individuals may consider using these retirement plan funds to make student loan repayments until the borrower’s financial condition improves