How does the Coronavirus Relief Act affect seniors?

In addition to authorizing direct payments to most Americans, including seniors, the $2 trillion economic relief package that Congress passed to help Americans deal with the devastating financial impact of the coronavirus pandemic changes required retirement plan distributions for this year and includes Medicare-related provisions.

Signed into law on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act provided a one-time direct payment of $1,200 to individuals earning less than $75,000 per year ($150,000 for couples who file jointly), including Social Security beneficiaries. Payments are based on either 2018 or 2019 tax returns.

The CARES Act also affects retirement plans. Recognizing that stock market volatility has depleted many retirement plan accounts, the Act waives the requirement that individuals over a certain age take minimum distributions from their non-Roth IRAs and 401(k)s in 2020. This includes any 2019 distributions that would otherwise have to be taken in 2020.

In addition, the CARES Act allows individuals adversely affected by the pandemic to make hardship withdrawals of up to $100,000 from retirement plans this year without paying the 10 percent penalty that individuals under age 59 ½ are usually required to pay. Individuals who use this option will still have to pay income taxes on the withdrawals, although the tax burden can be spread out over three years. The dollar limit on loans from retirement plans is also increased until the end of the year.

Finally, the Act includes potentially important provisions for Medicare beneficiaries. While the Centers for Disease Control and Prevention has been advising people to have a three-month’s supply of needed medications on hand, many Medicare Part D plans limit the amount beneficiaries may order. The CARES Act requires that during the crisis Part D plans lift these restrictions. Also, when a vaccine against COVID-19 is developed, it will be available to Medicare beneficiaries as part of Medicare, not Part D, and there will be no cost.

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