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New Guidance for Definition of a Qualified Individual

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:

-Quarantine

-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    • Having a reduction in pay (or self-employment income) due to COVID-19 or having a job offer rescinded or start date for a job delayed due to COVID-19;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childcare due to COVID-19, having a reduction in pay (or self-employment income) due to COVID-19, or having a job offer rescinded or start date for a job delayed due to COVID-19; or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.

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