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Frequently Asked Questions about the CARES Act

What is the CARES Act?

The Coronavirus Aid, Relief, and Economic Security Act of 2020 ("CARES Act") is federal legislation signed into law on March 27, 2020.

The CARES Act provides easier access to retirement funds for those who are in financial need due to the pandemic and certify that:

  • they have been diagnosed with COVID-19; or

  • they have a spouse or dependent who was diagnosed with COVID-19; or

  • they or someone in their household was 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.

TRS implemented the following provisions of the CARES Act, and each is described further in the Questions & Answers below. Note: These provisions of the CARES Act expired at the end of 2020.

  • TDA Withdrawals Under the CARES Act: Qualified members may apply online for a special CARES Act distribution of up to $100,000 from their Tax-Deferred Annuity Program accounts. No early withdrawal penalty will apply. Recipients have the option of spreading the distribution over three years on their tax returns, and of repaying the distribution to their TDA accounts.

  • Loans Under the CARES Act: Qualified members may apply for a CARES Act loan under both TRS plans, the Qualified Pension Plan and the TDA Program. The available loan amounts are higher through these CARES Act loans (generally, up to the lesser of $100,000 or 75% of available account balances) than through the standard QPP or TDA loans. Separate CARES Act loan applications are available for members who log in to our website. Note: The higher loan amounts are not available for loans requested after September 9, 2020.

  • Deferral of Loan Payments Under the CARES Act: Qualified members may defer making loan payments for a 12-month period on both new loans and existing loans. (Interest will accrue during this period.) This option is built in to the new CARES Act loan applications, and special forms are available to members who want to pause their current loan payment schedule for 12 months. Note: The deferral of loan payments is not available after December 4, 2020 for new loans and December 13, 2020 for existing loans.

  • Suspension of TDA Required Minimum Distributions for 2020: The CARES Act has suspended Required Minimum Distributions for 2020 for defined-contribution plans like TRS' TDA Program. RMDs would normally be paid to certain retired members with TDA accounts and TDA Beneficiary (TDAB) members, but no distribution will be required in 2020. 

TDA Withdrawals Under the CARES Act

The CARES Act permits qualified members to receive distributions from their Tax-Deferred Annuity Program account under special rules. 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?

TDA withdrawals under the CARES Act provisions will be taxed as ordinary income. However, members are permitted to spread out the distribution over a three-year period on their tax returns. The Internal Revenue Service is expected to provide more guidance on how to do this.

In addition, the CARES Act waives the 10% early withdrawal tax penalty that would otherwise apply to withdrawals taken by members under age 59½.

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.

W6) Can I repay a CARES Act TDA withdrawal?

Yes. Repayment of a CARES Act TDA withdrawal is optional.

If you take a CARES Act TDA withdrawal, you may choose to pay it 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.

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.

TRS will not accept repayments of CARES Act withdrawals that have been taken from other plans.

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.

Total withdrawals: Withdrawals of the entire TDA account balance can be made in one transaction, with one portion designated as a CARES Act TDA withdrawal and the remainder as a regular TDA withdrawal.

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.

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. 

Loans Under the CARES Act

The CARES Act permits qualified members to borrow up to $100,000 from their TRS accounts, which is an increase from the normal $50,000 limit on loans. CARES Act loans are available under the Qualified Pension Plan and the Tax-Deferred Annuity Program. Note: The higher loan amounts are not available for loans requested after September 9, 2020. Rules for CARES Act loans are described below:

L1) Who qualifies for CARES Act loans?

To qualify for a CARES Act loan, 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.

L2) How much can I borrow as a CARES Act loan?

The CARES Act provides that qualified members may borrow a total of $100,000 from their accounts; normally, the limit is $50,000. The maximum percentage of a qualified member’s account that is available for a loan is increased to 75%, in all cases. Note: The higher loan amounts are not available for loans requested after September 9, 2020. In accordance with the CARES Act, loan amounts are now subject to the regular limitations (generally, $50,000).

These dollar limits apply to all retirement plans sponsored by the City of New York, including TRS’ Qualified Pension Plan, TRS’ Tax-Deferred Annuity Program, and the New York City Deferred Compensation Plan (DCP). Outstanding loans from any of these plans will reduce the maximum available loan under the CARES Act.

If you are repaying loans through automatic deductions from pay, the amount of your paycheck must cover the amount of your loan payments. This requirement could reduce the amount available to you in a CARES Act loan.

L3) Can I take both a QPP loan and a TDA loan under the CARES Act?

Yes. If you meet the eligibility requirements to take a regular loan under both plans, you may take a CARES Act loan under both plans. However, the limits on loan frequency still apply. For QPP loans, one QPP loan per year is permitted, whether it is a CARES Act or a regular QPP loan. For TDA loans, a member may have up to five open TDA loans at the same time. Note: The higher loan amounts provided under the CARES Act are not available for loans requested after September 9, 2020.

L4) If I take a CARES Act loan, will my payments be deferred?  

Members who take a loan under the CARES Act provisions have the option to defer payments for 12 months when applying for the loan. If payment deferral is elected, 12 months would be added to the term of the loan; payments would not be required for the first 12 months, but interest and insurance charges would continue to accrue during this period.

Members who do not elect to defer payments at the start of their loan can request payment deferral at a later time; however, requests must be made by December 4, 2020.

For more information, please see the FAQs below about loan payment deferral.

L5) Does the CARES Act change other rules about loans?

Except as described here, all other rules for QPP loans and TDA loans remain in effect.

L6) How long will CARES Act loans remain available?

TRS will accept applications for CARES Act loans through September 9, 2020. Note: After this date, the higher loan limit of up to $100,000 is not available. The regular loan limit (generally, $50,000) now applies. The provision for a 12-month deferral of payments on a new loan remains in effect until December 13, 2020.

L7) How can I apply for a CARES Act loan?

As of May 15, special e-forms are available in the secure section of the website for qualified members to apply for a QPP loan or a TDA loan under the CARES Act Provisions. After logging in, members may access these e-forms–the QPP Loan Application (CARES Act Provisions) (code LO323) and TDA Loan Application (CARES Act Provisions) (code LO324)—through their Loans page.

The online loan applications and the paper QPP Loan Application (code LO6) or TDA Loan Application (LO15) cannot be used for CARES Act loans. Note: The higher loan amounts are not available for loans requested after September 9, 2020.

L8) What are the differences between a loan under the CARES Act and a regular TRS loan?

The chart below summarizes some key differences:

 

CARES Act Loans

Regular Loans

Maximum Loan Amount

$100,000 (across TRS and DCP loans), subject to other conditions
Note: Regular limits apply after September 9, 2020

$50,000 (across TRS and DCP loans), subject to other conditions

Application Deadline

Higher loan amounts not available after September 9, 2020

No deadline

How to Apply

E-form on TRS' website

Online application (or e-form on TRS’ website, for retiring members only)

Processing Time

E-form must be submitted by Wednesday for disbursement the following Friday

Online application must be submitted by midnight Sunday for Friday disbursement 

Loan Payment Deferral

12-month deferral available at loan initiation through December 4, 2020

12-month deferral not available at loan initiation but may be elected by qualified members at any time through December 13, 2020

Loan Payment Deferral Under the CARES Act

The CARES Act permits qualified members to defer payments on any QPP or TDA loan for 12 months, as described below:

D1) Who is eligible to defer loan payments under the CARES Act?

To qualify, 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.

D2) How do I apply for a loan payment deferral under the CARES Act?

To request this loan payment deferral on an existing loan, you will need to log in to the secure section of our website using your username and password; then go to the E-Forms page, where you will find the QPP Loan Payment Deferral Request and TDA Loan Payment Deferral Request listed. These forms must be completed and submitted online; there is no "paper" version of the form available.

As part of the application, you must choose the specific loan(s) for which you want to defer payments. You'll make this selection by indicating the loan number for each loan. Loan numbers can be found on your paystub, on your quarterly statements, or on your Loans page in the secure section of our website. Note: Requests for deferral of payments on an existing loan must be submitted by December 13, 2020.

D3) How long are payments deferred under the CARES Act, and how does this impact the life of my loan?

TRS provides a 12-month deferral period from the date your application is processed, and 12 months will be added to the term of the loan. Interest and insurance charges will continue during this period, and your loan will be reamortized at the end of the deferral period to incorporate them.

Any missed payments (payments that were already due by the date of application) are not included in the loan payment deferral.

D4) Are there any charges associated with deferring my loan payments under the CARES Act?

No. A $30 service charge is typically applied when members request a reamortization, but that will not apply to these reamortizations related to the CARES Act provisions.

D5) When will my payments stop if I request a loan payment deferral?

The loan payment deferral will take effect with the next available payroll, typically within 30 days.

Due to the processing time, if only a few automatic payments remain on your loan, it may not be possible to implement your request before the loan is fully repaid.

Note for members who are paid on the Department of Education payroll: Because summer paychecks are cut in advance, payroll changes (such as stopping loan payment deductions) cannot be implemented during the summer. Changes requested in early May can generally be implemented before the summer paychecks are cut, but changes requested later cannot be implemented until the first payroll in September or later.

D6) If I defer my loan payments, do I still need to repay my loan within five years of the loan’s disbursement?

No. The five-year repayment term will be extended by the length of the deferral.

D7) If I defer my loan payments, how will my payment amount be affected?

At the end of the 12-month deferral period, TRS will reamortize your loan. When you resume payments, you should expect your payment amount to be higher due to interest that accrued during the deferral period.

D8) If I have more than one open loan, can I request to defer payments on all loans?

Yes. When you apply, you must specify the loans for which you want to defer payments. Requests for QPP loans and TDA loans must be made separately.

D9) Can I resume making regular loan payments before the end of the deferral period?

Yes. If you want to resume a regular payment schedule, you may request this by contacting TRS. Please note that, if you do end the deferral period early, you will not be able to defer payments again for that loan. One deferral request is permitted per loan under the CARES Act.

D10) Can I make a single loan payment during the deferral period?

Yes. You can use the Online Payments feature to make one or more loan payments using an e-check from your bank account, a credit card, or debit card. Any payments you make online will not affect the deferral period, but they will be taken into account when TRS reamortizes your loan at the end of the deferral period.

D11) How long will the option to defer loan payments be available?

Requests for loan payment deferral under the CARES Act must be submitted by December 4, 2020 for new loans and December 13, 2020 for existing loans.

Suspension of TDA Required Minimum Distributions for 2020

The CARES Act has suspended Required Minimum Distributions for 2020 for defined-contribution plans including TRS' TDA Program, as described below.

R1) Who is affected by the suspension of RMDs?

RMDs would normally be paid to certain retired members with TDA accounts and TDA Beneficiary (TDAB) members, but no distribution will be required in 2020.

In early May, TRS contacted affected members by letter to explain the suspension and to communicate the amount that they would have been required to receive as an RMD; that amount is not eligible for direct rollover in 2020.

R2) If there is no distribution required for 2020, why is the RMD amount not eligible for rollover?

As a general IRS rule, RMDs are not eligible for rollover. Even though the CARES Act suspended RMDs for 2020, the amount that would have been payable as the RMD, if withdrawn from a plan like TRS' TDA Program, is not eligible for direct rollover.

There may be circumstances where distributed funds are eligible for an indirect rollover. You would need to speak with your tax advisor about that.