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MTA Deferred Compensation Program: Understanding the CARES Act and what it means for you

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As a result of COVID-19, relief programs have been put in place to help you meet your immediate financial needs. The MTA Deferred Compensation Committee has recently adopted all of the provisions related to the CARES Act for its Retirement Programs. This includes loosened restrictions on accessing your retirement savings. Some programs require you meet certain eligibility conditions, while other measures are more broadly available. Keep in mind that short-term moves in your retirement account can impact your long-term savings strategy.

Overcoming challenges together

For many of us, we're adjusting to a "new normal" as our jobs, families, and lives are impacted by COVID-19. If you're feeling uncertain about what's next and how to manage your money, know you're not alone. Prudential is here to help. Our goal is, and always has been, to help you improve your financial wellness, save for the long term, and prepare for your financial future. We recognize you may need to prioritize managing your short-term financial needs in the current situation. And, if that is the case, we're here to provide you with important information and resources you'll need to make the best decisions for you and your loved ones.

The government recently signed into law a stimulus package – the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). It offers a variety of relief programs for Americans, such as cash payments, temporary federal student loan relief, and expanded unemployment benefits. These programs can certainly help, but they may not be enough to fully cover your immediate needs.

The CARES Act and your retirement savings

The MTA Deferred Compensation Program offers ways to access your money normally, and this relief program has expanded these options by providing loosened restrictions on early withdrawals and loans against retirement accounts for eligible individuals.

You're eligible if you meet one of these qualifications:

  • You, your spouse or dependent is diagnosed with COVID-19 or with the virus SARS-CoV-2, by a test approved by the Centers for Disease Control and Prevention.
  • You have experienced adverse financial consequences as a result of being quarantined, furloughed or laid off, or if your work hours have been reduced, or you are unable to work due to lack of childcare or business closures related to the coronavirus pandemic.

Coronavirus Related Distributions (CRD)

  • Withdraw up to $100,000 without the usual 10% penalty and the 20% mandatory tax withholding.
  • Spread out any income taxes that you owe over three years from the date you took the distribution. You will need to claim this tax treatment on your personal income tax returns for 2020.
  • Allow for any CRD repayment into your account (Please contact one of our Dedicated Retirement Counselors listed below for details).

CARES Act – Loans

  • You may request a loan of up to $100,000 or 100% of your account balance. (You will need to call Prudential directly as this request cannot be processed online).
  • This option is available from March 27 through September 23, 2020.
  • If you have an existing loan, the CARES Act allows for loan repayments to be extended for one year. Please contact Prudential directly if you wish to elect this provision.
  • If you are interested and eligible to take a CARES Act loan and meet the criteria for up to $100,000 maximum limit, please know that this provision is only available from March 27, 2020 through September 23, 2020 (180 days from the date the law went into effect).

Required Minimum Distributions (RMDs)

The CARES Act has allowed for the suspension of  all RMD payments for calendar year 2020. If you are currently receiving an RMD, you will receive a notification regarding the suspension for 2020; however, if you would like to have your RMD processed and paid to you in 2020, please contact Prudential directly. All RMD payments will resume in 2021; there is no action needed on your part.

Some things to think about before accessing your retirement savings

We understand that it is difficult to maintain a long-term focus right now, given these unprecedented times. We encourage you to keep your retirement savings goals on track, as much as possible, so you can build a stronger financial future. Here are some important considerations:
 

  • The money you take out from your retirement savings loses its potential to grow for you. It can create a significant impact for your financial future.
  • Withdrawing savings during a down market may limit your ability to recover your losses. If your retirement investments have experienced losses as a result of the recent market downturn, selling them now will "lock in" your losses.
  • You may need to pay tax on the money you withdraw. If you qualify, the newly enacted law (CARES Act) forgives penalties, but you may still be required to pay taxes. We suggest you consult with your tax advisor prior to taking any distributions.
  • Loans will need to be repaid. If you qualify and request a loan, you'll need to pay back the funds with after-tax dollars.  Even though the payments can be suspended for a year, interest will continue to accrue during the period they are suspended. Once the suspension has expired, your loan will be reamortized to include the additional interest that was deferred, which will result in a higher loan repayment amount.

Next Steps: Talk to a Retirement Counselor

We're here for you. We encourage you to set up a personal consultative discussion to review your options and the impact. To set up a phone or virtual one-on-one consultation, you may contact counselors directly using their mobile numbers and emails listed below:

 

2 Broadway

Margarita Tsang
646-413-0234
margarita.tsang@prudential.com

Brooklyn, Queens and Long Island

George Russo
917-579-3851
george.russo@prudential.com

Brooklyn and Staten Island

Hayden Yogman
917-597-2188
hayden.yogman@prudential.com

Bronx, Queens, Westchester & Connecticut

Drew Miller
917-608-1715
andrew.miller@prudential.com

Bronx, Westchester and Connecticut

Greg Sirett
347-844-3798
gregory.sirett@prudential.com

Manhattan, Bronx and Brooklyn

Edward Summers
917-485-2745
edward.summers@prudential.com

Manhattan and Queens

Diane Texin, Manager
917-280-3614
diane.texin@prudential.com

Queens

Owen Ashley
646-957-4385
owen.ashley@prudential.com

 

If you have any questions regarding this communication, or wish to apply for a CRD distribution, please contact Prudential at 877-PLN-4MTA (877-756-4682).  Trained specialists are available to help with the CARES Act provisions.