We are fortunate that so far the animation industry has not been affected by the pandemic and most members are still working. Still, everyone’s situation is different and many families may be facing financial challenges. In an effort to provide financial support for participants of our 401k plan who may need it, the Trustees unanimously approved enacting new hardship withdrawal provisions.
The CARES Act permits Coronavirus Related Distributions (CRDs) to individuals affected by COVID-19. An ‘affected individual” is defined as someone:
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Who is diagnosed with COVID-19 by a CDC-approved test;
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Whose spouse or dependent is diagnosed with COVID-19 by a CDC-approved test;
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Who experiences adverse financial consequences as a result of being quarantined, being furloughed, laid off, or having work hours reduced as a result of COVID-19, being unable to work due to lack of child care due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to COVID-19;
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Other factors as determined by the Treasury Secretary.
The CARES Act permits up to $100,000.00 in retirement account withdrawals without penalty. Any participant of our 401k plan, regardless of their current employment status, can self-identify as an “affected individual” and request a hardship withdrawal of up to $100,000.00.
If you are younger than 59 and a half, the 10% federal penalty tax that usually applies will be waived. The taxes owed on the income would be spread over a three-year period, and would be waived if you repay the withdrawal within a three-year period. This withdrawal is not subject to the mandatory 20% withholding for taxes. Instead, Vanguard will withhold 10%, which can also be waived upon request.
If you are planning to take a withdrawal from both your IAP and 401(k) accounts, you will not be penalized unless the combined total withdrawn is more than the $100,000 allowed by the CARES Act.
The TAG office will not be processing hardship withdrawal requests. In order to take the hardship withdrawal, you will have to contact Vanguard to speak to a customer service representative.
Furthermore, the CARES Act waives Required Minimum Distributions (RMD) for 2020 and the rules for paying back loans have been relaxed.
Get in contact with Vanguard to learn more. You can visit their website at https://retirementplans.
If you have any questions, email 401K@tag839.org.