In response to COVID-19, the Coronavirus Aid, Relief, and Economic Security (CARES) Act authorizes qualified individuals to withdraw up to $100,000 from their 403(b) account in 2020, without incurring a 10% early withdrawal penalty or being subject to 20% withholding. Current and former employees qualify if they experience specified financial hardships related to COVID-19 or if they, a spouse, or dependent has a positive diagnosis. Distributions are subject to income tax, which may be spread ratably across a three-year period or avoided altogether if repaid within the same period.
Additionally, for plan loans taken between March 27 and September 23, 2020, the cap is increased to the lesser of $100,000 or the value of the employee’s accrued benefit under the plan (up from the lesser of $50,000 or 50% of the employee’s accrued benefit under the plan). For qualifying individuals with plan loan payments due between March 27, 2020 and December 31, 2020, the payment deadline is extended by one year, with interest continuing to accrue.