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Missouri Department of Transportation & Missouri State Highway Patrol Employees’ Retirement System

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COVID-19 CARES Act

Among other things, the Coronavirus Aid, Relief, and Economic Security (CARES) Act offers tax relief if you take a lump-sum payment in cash for a Coronavirus-related reason.

Assistance is available for individuals who were diagnosed with COVID-19 or whose spouse or dependent was diagnosed with the disease as well as for those who are negatively impacted financially due to quarantine, furlough, layoff, work hour reduction or who cannot work due to lack of childcare.

The CARES Act includes a provision that affects the taxability of lump-sum distributions such as a refund of employee contributions or BackDROP payments. This only affects the taxability of these payments. It does not modify any MPERS rules or requirements related to the payments.

For any of these lump-sum payments, a member can indicate that the payment is a Coronavirus-related distribution based on any of the following reasons:

  1. The member was diagnosed with the virus SARS-CoV-2 or with Coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention.

  2. The member’s spouse or dependent was diagnosed with such virus or disease by such a test.
  3. The member experienced adverse financial consequences as a result of being quarantined, furloughed, laid off, or having work hours reduced due to such virus or disease; being unable to work due to lack of childcare due to such virus or disease; closing or reducing hours of a business owned or operated by the individual due to such virus or disease; or other factors as determined by the Secretary of the Treasury (or the Secretary’s delegate).

If the payment is a Coronavirus-related distribution:

  1. The 10% early withdrawal penalty (for those younger than age 59½) will be waived on distributions of up to $100,000. MPERS will report the distribution as taxable in 2020, but the member may elect to spread the tax over three years on the tax return.
  2. At the request of the member, MPERS will withhold 10% for taxes on the Coronavirus-related distribution instead of the 20% withholding required with other lump-sum payments. The amount of withholding does not change the member’s tax liability. The member may re-contribute the funds to another eligible retirement plan as a “rollover” within three years.

The following are governed by the Missouri Revised Statutes and cannot be waived by MPERS staff:

  1. A member must meet all eligibility rules for retirement and BackDROP.
  2. A member must have terminated MPERS-covered employment to receive a refund of employee contributions.
  3. A member must wait 90 days after termination of employment or application for a refund (whichever is later) to receive a refund of employee contributions.

The CARES Act is effective January 1, 2020 through December 31, 2020.

MPERS advises that you discuss the tax implications of the CARES Act with your tax preparer or a tax professional before making any applicable decisions.

If you have questions about the CARES Act and how it may affect your payment distribution options, please contact MPERS at mpers@mpers.org or 800-270-1271.