Policy Backgrounders

Individual Retirement Account (IRA) Provision In the CARES Act

December 09, 2020

Among the big-money, high-profile provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020, there is a smaller tax provision. Like many of the headline items in the law, this tax provision is scheduled to expire, and so may receive some attention as a successor to the CARES Act is debated this year or next.

The objective of this provision is to allow persons adversely affected by the pandemic with respect to health or employment to meet their emergency liquidity needs by using balances in their Individual Retirement Accounts (IRAs) or other retirement vehicles at a reduced tax penalty relative to that charged for premature withdrawals under current law. There are also repayment options so that individuals who get back to work and recover from the pandemic hit can put the money back into their retirement accounts and so maintain their reserves for their retirement years without tax penalties.