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CARES Act Loan Repayment Deferment

The CARES Act allows for qualified individuals to defer repayment of their retirement plan loan(s) through the end of the year. A participant is considered a "qualified individual" if:

  • The participant is diagnosed with COVID-19
  • The participant's spouse or dependent is diagnosed with COVID-19
  • The participant experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to COVID-19
  • Other factors as determined by the Treasury Secretary

While in deferment, the loan will continue to accrue interest with each delayed payment. The loan will need to be re-amortized when payments are ready to be resumed and at that time an updated payment amount will be calculated.

What should a plan sponsor do when a qualified participant requests to defer loan repayments?

Once a request has been made to defer loan repayments, please provide your Plan Consultant with the following information:

  • Participant's name and last 4 of SSN
  • The last payroll date to include a loan repayment before deferment
  • The effective date of the loan deferment
  • The anticipated date payments will resume (if known)

While not a required document, in the event that you would like to retain documentation from participants regarding requests to defer loan payments, we have prepared this Loan Repayment Suspension Request Form for your use.

What should a plan sponsor do when payments are ready to be resumed on a previously-deferred loan?

Once a participant has returned to work and/or is ready to resume repaying their outstanding loan, it is important that you contact your Plan Consultant prior to resuming loan payment deductions. At this point, the loan will be re-amortized and you will be provided with an updated payment amount and maturity date for the loan.