Former Employees Now Included in CARES Act

U-M has added former employees to the group of plan participants eligible to withdraw funds or initiate loans from certain retirement accounts. Former employees may now take a qualifying coronavirus distribution of the university contribution that was previously unavailable until age 55 or older.

These measures were enacted in May through the passage of the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Who is Eligible?

Faculty and staff, as well as former university employees, in certain U-M retirement savings plans are eligible. The transactions must be in response to a qualifying coronavirus-related hardship, including:

Employee or former employee diagnosis of COVID-19
Spouse or dependent diagnosis of COVID-19
Adverse financial consequences due to quarantine, furlough, layoff or reduction in work hours due to COVID-19
Inability to work due to lack of child care related to COVID-19
Closing or reducing hours of a business owned or operated by the employee or former employee due to COVID-19
Other factors determined by the U.S. Secretary of the Treasury

If you’re eligible, you’ll self-certify that you meet these requirements when you initiate the process.

Which Retirement Plans are Eligible?

The CARES Act applies to the following U-M plans at TIAA and Fidelity Investments:

403 (b) Basic Retirement Plan
401 (a) Basic Retirement Plan (former employees only)
403 (b) Supplemental Retirement Account (SRA)
457 (b) Deferred Compensation Plan

Details regarding eligibility and plan specifics are complex as outlined in the CARES Act. More information is available on the University Human Resources website.

You may take advantage of withdrawals up to a combined total of $100,000 from eligible retirement plans and up to $100,000 in 403(b) SRA and 457(b) loans – twice as much as normally allowed for loans.

How Do Taxes Affect Distribution?

Under the CARES Act, some standard tax withholding and penalties have been altered or waived for withdrawals. Although withdrawals are subject to taxation, the act allows the following tax advantages:

Waiver of the standard 10 percent Internal Revenue Service (IRS) penalty for distributions taken before age 59½
Waiver of standard 20 percent federal tax withholding. Income tax is still due on the withdrawal, but you may choose to have no withholding at the time of distribution.
Optional three-year period to pay the taxes on the distribution
Optional three-year period to repay the distribution back into the retirement account

Where to Start

Contact TIAA and Fidelity directly to arrange transactions or consult with an advisor:

Due to the ongoing COVID-19 pandemic, TIAA and Fidelity will conduct appointments by phone, video and email:

Fidelity Investments
(800) 343-0860
netbenefits.com/uofm

TIAA
(855) 400-4294
TIAA.org

Be Cautious

With many resources available to assist if you’re experiencing COVID-19-related hardships, it’s a good idea to consult an expert. Each person’s situation is different and requires unique planning.

U-M and community resources include:

University COVID-19-specific programs
TIAA and Fidelity representatives
University and community resources
Tax advisors

Published on Friday July 10, 2020