Skip to main content

You are here


IRS Updates CARES Act FAQs


The IRS has updated its frequently asked questions about COVID-related relief for retirement plans and IRAs under the CARES Act. 

Specifically, on Oct. 22 the IRS added to its May 2020 FAQs two questions and answers related to rehires following bona fide retirement and in-service distributions:

Q. A qualified pension plan that does not provide for in-service distributions starts making benefit distributions to an individual who applies for retirement benefits and experiences a bona fide retirement. If the plan sponsor rehires the individual due to unforeseen hiring needs related to the COVID-19 pandemic, will the rehire cause that individual's prior retirement to no longer be considered a bona fide retirement? 

A. Generally, no. Treasury regulations generally require a qualified pension plan to be maintained primarily to provide systematically for the payment of definitely determinable benefits over a period of years—usually for life—after (1) retirement or (2) an individual reaching normal retirement age. 

Accordingly, a plan that does not permit in-service distributions may start making benefit distributions to an individual only when he or she has a bona fide retirement. Although the determination of whether an individual's retirement under a plan is bona fide is based on a facts and circumstances analysis, a rehire due to unforeseen circumstances that do not reflect any prearrangement to rehire the individual will not cause her or his prior retirement to stop being considered a bona fide retirement under the plan. 

Visit our Coronavirus resource center!

In addition, says the IRS, if the sponsor of a qualified pension plan wishes to rehire a retired employee to fill an unforeseen hiring need related to the COVID-19 pandemic, the sponsor should analyze the impact of the rehire under the plan by taking into account any plan terms—including any need for plan amendments—relating to rehires. 

Q. May a qualified pension plan permit individuals who are working to begin receiving in-service distributions?

A. Yes. A qualified pension plan generally may allow individuals to begin in-service distributions if they have reached either age 59½ or the plan's normal retirement age. However, distributions that begin to be made to an individual before he or she is 59½ years old may be subject to a 10% additional tax under Internal Revenue Code Section 72(t), unless the distributions fit within an exception to that tax.