During 2020, the CARES Act permitted qualified members to receive distributions from their Tax-Deferred Annuity Program account under special rules. New CARES Act TDA withdrawals are no longer available, but members who received a CARES Act withdrawal in 2020 have the option to repay the withdrawal.
Rules for these CARES Act TDA withdrawals
are described below:
W1) Who is eligible for a TDA withdrawal under the CARES Act?
To qualify for a CARES Act TDA withdrawal, members must certify that they
a) have been diagnosed with COVID-19,
b) have a spouse or dependent who was diagnosed with COVID-19, or
c) were financially harmed by COVID-19 due to quarantine, furlough, layoff, reduction in work hours, inability to work due to lack of child care, or closure/reduction of hours of their own business.
W2) How much can be withdrawn under the CARES Act provisions?
A member may withdraw up to a total of $100,000 in CARES Act distributions from all retirement and deferred-compensation plans sponsored by the City of New York.
CARES Act distributions are not considered retirement plan loans and do not count toward the dollar limits on plan loan amounts.
W3) Are there service or age restrictions on a CARES Act TDA withdrawals?
No. A TRS member participating in the TDA Program may qualify for a CARES Act TDA withdrawal regardless of age or employment status.
W4) How are CARES Act TDA withdrawals treated for tax purposes?
CARES Act TDA withdrawals are considered ordinary income. However, the CARES Act includes two provisions that impact the taxability of the income: 1) Members are permitted to spread out the distribution over a three-year period on their tax returns; and 2) members have the option to recontribute (repay) the withdrawal to their TDA account as long as the account is still open.
Tax preparation software can assist you in 2020 tax filing, including treatment of CARES Act distributions. You may also want to refer to the Internal Revenue Service's information, such as the Guidance for Coronavirus-Related Distributions and Loans from Retirement Plans Under the CARES Act (Notice 2020-50) that can be found under Notices on the IRS' Coronavirus and Economic Impact Payments: Guidance page.
For questions about an individual situation, please consult an accountant or attorney. TRS cannot provide tax or legal advice.
W5) Is there tax withholding on a CARES Act TDA withdrawal?
Yes. 10% of a CARES Act TDA withdrawal will be withheld for federal tax unless the member elects a different withholding percentage on the withdrawal application. Amounts withheld will be credited to a member's taxes for the year of distribution.
Note: The CARES Act waives the 10% early withdrawal tax penalty that would otherwise apply to withdrawals taken by members under age 59½.
W6) Can I repay a CARES Act TDA withdrawal to my TDA Account?
Yes. Recontribution (repayment) of a CARES Act TDA withdrawal is optional.
If you take a CARES Act TDA withdrawal, you may choose to pay all or part of the withdrawn amount back into your TRS TDA account within three years of the distribution, provided you still have an open TRS TDA account to receive the repayment. See W12) below for additional information.
Note: Repayment of a CARES Act withdrawal is not a TDA contribution and does not count toward the annual contribution limit set by the IRS for in-service members.
W7) Are CARES Act TDA withdrawals eligible for rollover?
No. TDA withdrawals under the CARES Act may not be rolled over to other retirement plans. This is one difference between CARES Act TDA withdrawals and regular TDA withdrawals; regular TDA withdrawals are generally rollover-eligible.
W8) Can I take a TDA withdrawal that exceeds the CARES Act dollar limit?
The answer depends on whether you are taking a partial withdrawal or a total withdrawal that closes your TRS TDA account.
Partial withdrawals: CARES Act TDA withdrawals cannot be combined with other distributions. So, if you want to take a TDA withdrawal exceeding the CARES Act dollar limit ($100,000 across City-sponsored plans), you must apply for the CARES Act TDA withdrawal separately from the regular partial TDA withdrawal. Please note that one distribution must be completed before you can request another distribution.
W9) Can I take more than one CARES Act TDA withdrawal?
Yes, as long as you qualify and all prior TDA distributions are completed.
W10) How do I apply for a CARES Act TDA withdrawal?
To apply for a CARES Act TDA withdrawal, log into the secure section of the website, go to your TDA page, and use the Withdraw Funds option. The TDA Withdrawal Application (TD32) and e-form equivalent cannot be used for a CARES Act TDA withdrawal.
Note: After 2020, TDA withdrawals under the CARES Act provisions are not available.
W11) How long will the CARES Act TDA withdrawal option remain available?
The deadlines for requesting a TDA withdrawal under the CARES Act provisions are below:
- November 30, 2020 is the last day to file for a total withdrawal.
- November 30, 2020 is also the last day to file for a partial withdrawal that includes any amount drawn from the variable-return Passport Funds.
- December 18, 2020 is the last day to file for a partial withdrawal that is drawn from the Fixed Return Fund only. If filing after November 30, please ensure that the amount you request can be drawn entirely from your current Fixed Return Fund holdings and would not need to draw on holdings in the variable-return Passport Funds.
W12) How do I repay a CARES Act TDA withdrawal to my TDA account?
As long as you still have an open TDA account to receive eligible funds, you can log into the secure section of the website and use the Online Payments feature to recontribute (repay) CARES Act withdrawals. Payment by check is not permitted.
To view details of your CARES Act TDA withdrawals, go to your TDA page in the secure section of the website, look for the TDA Withdrawals box, and then choose View History. On the next screen, CARES Act withdrawals are shown separately in a table with the date of each withdrawal, amount already repaid, amount available to repay, and the last day to repay.
To assist you with tax filing, this table also shows how much of the CARES Act withdrawal amount was previously taxed. You can calculate what percentage of the withdrawal was previously taxed. If you repay the withdrawal, the payment will be credited to your TDA account using the same percentages of previously taxed and pre-tax funds.
W13) Can I repay a CARES Act TDA withdrawal to an account other than my TRS TDA account?
Retirement plans and IRAs that are unaffiliated with TRS may accept repayments of a CARES Act TDA withdrawal. To learn whether a specific plan would accept these repayments, please contact that plan's administrator.
W14) Can I repay an external CARES Act withdrawal into my TDA account?
No. TRS will not accept repayments of CARES Act withdrawals that have been taken from other plans.
TRS will accept only repayments of CARES Act withdrawals from the same TRS TDA account, as described in W6) above.