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CARES Act Form

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Mass Mutual Hardship Form

Hardship Withdrawal - Tax Notice

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                      NOTICE

 

April 20, 2020

LHD

 

NEW DISTRIBUTION OPTION UNDER THE CORONAVIRUS AID, RELIEF AND ECONOMIC SECURITY (CARES) ACT

Dear Brothers & Sisters:

     Americans who are experiencing financial hardship amid the COVID-19 pandemic may be eligible for emergency relief granted by the CARES Act.  “Eligible participants” may have access to their retirement plan account savings through the Local 138, 138A, 138B & 138C, I.U.O.E. Annuity Fund (the “Annuity Fund”).  The Fund has adopted new rules to allow eligible participants to take advantage of emergency relief permitted under the CARES Act, as described in this Notice.

     Normally, anyone who withdraws money from the Fund before age 59 ½ is assessed a 10% penalty on that amount when filing taxes.  The CARES Act allows you, regardless of your age, the ability to take a “coronavirus-related distribution” up to $100,000 from your 401(k) Account in 2020 without incurring the withdrawal penalty.  You will still owe ordinary income tax on the amount withdrawn but this can be paid over three years.  The tax can be avoided if you choose to pay back the amount withdrawn within three years.  It would be wise to consult a financial professional to help you make decisions that make the most sense for your circumstances.  Rules governing distributions from the Annuity Fund are subject to the terms of the Plan and the Internal Revenue Code.

     Below are some often asked questions and general answers relating to the emergency relief provisions adopted under the CARES Act.

 

 Q. How can I become eligible for a “coronavirus-related distribution?”

 A. In order to be eligible for a coronavirus-related distribution you must be an “eligible participant.” You are only an eligible participant if you are an individual:

  • Diagnosed with SARS-CoV-2 or COVID-19 by a test approved by the Centers for Disease Control and Prevention; OR
  • Whose spouse or dependent is so diagnosed by such a test; OR
  • Who experiences adverse financial consequences as a result of
    • Being quarantined; OR
    • Being laid off or furloughed or having work hours reduced due to the virus; OR
    • Being unable to work due to lack of child care due to the virus; OR
    • Closing or reducing hours of a business owned or operated by the individual due to the virus; OR
    • Other factors as determined by the Secretary of the Treasury

 

Q. Do I qualify as an eligible participant if my spouse is quarantined, laid off, furloughed or having work hours reduced due to the virus?

A. No. You qualify as an eligible participant if the examples above affect your employment status directly. The only example in which you can access a coronavirus-related distribution due to what occurs with your spouse is if he or she is diagnosed with SARS-CoV-2 or COVID-19 by a test approved by the Centers for Disease Control and Prevention.  Additional categories of eligible coronavirus-related distributions may be available in the future as determined by the United States Secretary of the Treasury.

 

Q. What if I am a participant that terminated a while back, say 2 years ago, and left a balance in the Plan? If I am determined to be a coronavirus-eligible participant can I receive a coronavirus-related distribution?

A. Yes, as long as you are still eligible for a distribution generally, and also qualify for a “coronavirus-related distribution,” you are eligible to apply.

 

Q. How do I show the Fund that I am eligible for a coronavirus-related distribution?

A. You will be provided an application for a coronavirus-related distribution from the Fund that will be processed by the Local 138 Self Directed provider Mass Mutual. This application is available at our website, www.local138.com, under the Annuity Fund tab. You will be required to certify eligibility for a coronavirus-related distribution on the application.

 

Q. Does the CARES Act $100,000 distribution maximum limit apply in aggregate across all of my retirement plans, individual retirement accounts, etc.?

A. The tax and other financial advantages of taking a CARES Act $100,000 maximum distribution is a combined limit applied to all individual account plans that you participate in and any Individual Retirement Accounts (“IRA’s”), should you have any. It is the participant’s responsibility to manage this and ensure that the total withdrawn from all retirement accounts does not exceed $100,000. If you are unsure in any given case if this applies to your specific circumstance, you should consult a financial professional

 

Q. How will tax withholding apply to coronavirus-related distributions?

A. A coronavirus-related distribution is not subject to the mandatory 20% income tax withholding that otherwise applies to an eligible rollover distribution. The 10% early withdrawal penalty also does not apply to coronavirus-related distribution.  Participants have an option to waive the 10% Federal income tax which is normally withheld at the time of payment for a non-periodic distribution under the Tax Code.  State taxes are applicable and vary by state.  We encourage you to discuss with a financial professional what, if any, tax consequences arise by taking a coronavirus-related distribution, or by waiving federal income tax withholding and its impact on your finances.

 

Q. When will the deadline to take a coronavirus-related distribution end?

A. Coronavirus-related provisions apply to distributions made to qualified individuals made on or after January 1, 2020, and no later than December 30, 2020.

 

Q. What effect does taking a coronavirus-related distribution have on my future retirement benefits?

A. Any withdrawal from your 401(k) Account prior to your retirement will have an impact on your preparation for retirement. Prior to taking a coronavirus-related distribution if you are eligible, you may want to discuss the pros and cons with a financial advisor.

 

These Questions and Answers are provided for general informational purposes, and may be subject to change or clarification based on additional legislative relief by the United States Congress, or guidance published by the Internal Revenue Service or applicable Government Agencies.         

 

Local 138 Annuity Fund

March 13, 2020

The most lasting impact of the current public health crisis may not be illness but the economy. Local 138 takes the health of your Annuity very seriously. Always have. Always will.

Local 138 has been in sustained and probing communication with its team of financial advisors to ensure that we not only protect the value of the Annuity Fund, but spot opportunities to strengthen it in the months to come.

That is not to say that the rollercoaster formally known as Wall Street hasn’t buffeted our portfolio. One of our experts reported, “The magnitude of the market decline makes it inevitable that any portfolio with meaningful equity exposure will sustain some depreciation. Relative to most plans however, the Trustee Directed Annuity Fund's equity exposure is quite modest, which will dampen the effects of the current Bear Market. In addition, the Fund has significant exposure to fixed income securities, which have benefited from investors' "flight to safety" and have gained value as the equity markets declined. Overall, the Fund's posture is very conservative and was designed to weather turbulent markets."

The short version is some of our investments will be hurt by the market’s response to the Corona virus, but the majority of the Annuity Fund is shielded from the market's descent.

No one likes a drop-in asset value but Local 138 has always been conservative in where it puts your money, even at a time when most thought the Bull Market would run forever. We are students of history and know far better than that.

And like those who stayed the course 85 years ago, we too will be looking for extraordinary opportunities on behalf of our members when this roller coaster comes to a stop.

 

 

 

 

 

 

 

 

 

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