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CARES Act Changes Affect Retirement Plans, FSAs, & Dependent Care Accounts

plan changes

2.5 minute read

The Coronavirus, Aid, Relief, and Economic Security (CARES) Act was signed into law in March. It has made several changes to retirement and health care benefits to assist those who have been impacted by COVID-19.

Retirement Plans

The CARES Act has made several changes that affect tax-qualified retirement plans including 401(k), 403(a), and 457(b) plans.

Employers may allow participants (impacted by COVID-19) to take in-service distributions of up to $100,000, without paying the 10% tax penalty for early distributions. Those who are eligible can receive these penalty-free distributions from January 1, 2020 through December 31, 2020.

For those retirement plans that permit loans, the CARES Act allows the employer to increase the maximum loan amount and extend repayment periods for loans made during the 180-day period beginning on March 27, 2020 (for those impacted by COVID-19). Also, the deadline for any loan repayments that are due between March 27, 2020 and December 31, 2020, are delayed for one year.

Federal law states that retirement plan participants take distributions (required minimum distributions) by the time they reach age 72 (or age 70 ½ for those who reached age 70 ½ before January 1, 2020). The CARES Act waives the requirement to make required minimum distributions during 2020 for defined contribution plans like 401(k), 403(b), and 457(b) plans.

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Medical FSAs and Dependent Care Accounts (DCA)

The CARES Act has further defined qualifying events (pertaining to COVID-19) to provide greater flexibility for mid-year election changes for both types of accounts.

For Medical Flexible Spending Accounts (FSA), the IRS has recognized the following as qualified events where employees could make an election change:

  • FMLA leave
  • Reduction in work hours that causes loss in coverage
  • Change in employment status
  • Substantial change in employer benefits and cost
  • Change in cost from provider
  • Change in provider due to change in cost

With schools and childcare facilities temporary closed, employees may need to change their DCA election. Some qualifying events include:

  • Loss of childcare due to daycare facility closed
  • No longer need childcare due to reduction in hours, work from home orders, or loss of employment
  • Need for childcare services due to schools being closed

For more details, download the bulletin.


This blog is intended to be a compilation of information and resources pulled from federal, state and local agencies. This is not intended to be legal advice. For up to the minute information and guidance on COVID-19, please follow the guidelines of the Centers for Disease Control and Prevention (CDC) and your local health organizations.


National Insurance Services is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Readers are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the readers’ business activities.

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Ken Zastrow

Ken Zastrow

Ken Zastrow enjoys establishing a strong rapport with his clients. He believes that education is key in helping them understand their benefit plans. Ken has a strong background in underwriting and post-employment benefits. As Employee Benefits Consultant at National Insurance Services, Ken is responsible for the overall assessment and management of all an employer’s benefit plans including claim reconciliation, policy changes, renewals, and medical and dental analytics. He is also well versed in compliance, benefit integration, and early retiree benefits. Ken is a licensed insurance agent (Health, Life, Series 6 and Series 63) as well as a registered financial representative with GWN Securities. He works with schools, cities, and counties in Wisconsin.