If your plan elected any of the CARES Act provisions to allow for coronavirus-related distributions or the expanded loan provisions, there has been a change to who may be considered a “qualified individual”.
Participants defined as a qualified individual include:
- Individual diagnosed with the Coronavirus with a CDC approved test
- Individual whose spouse or dependent has been diagnosed with the Coronavirus with such test
- Individual who, because of the Coronavirus, suffered adverse financial consequences due to:
- Furlough or layoff
- Reduced work hours
- Individual who cannot work due to lack of childcare due to the Coronavirus
- Individual who is a business owner/operator who has closed the business or reduced hours because of the Coronavirus
The IRS has recently expanded the definition of a qualified individual to include an individual who experiences adverse financial consequences as a result of:
- Having a reduction in pay (or self-employment income) due to COVID-19 or having a job offer rescinded or start date for a job delayed due to COVID-19;
- The individual’s spouse or a member of the individual’s household experiencing any of the following: being quarantined, being furloughed or laid off, having work hours reduced due to COVID-19, being unable to work due to lack of childcare due to COVID-19, having a reduction in pay (or self-employment income) due to COVID-19, or having a job offer rescinded or start date for a job delayed due to COVID-19; or
- Closing or reduction of hours of a business owned or operated by the individual’s spouse or a member of the individual’s household due to COVID-19.
For purposes of applying the expanded definitions, a “member of the individual’s household” means someone who shares the individual’s principal residence.
You should make your participants aware of the new guidelines. If any participants were previously denied a distribution or loan, they may now be eligible to take advantage of these options.
Click here to access a sample Qualified Individual Certification to provide to Participants.