Broker Check
 

LOSAP and CARES Act

March 3, 2020

Law Office of Robert J. Toth, Jr.

110 West Berry Street, Suite 1809
Fort Wayne, IN 46802

Bruce D. Linger, CFP, CRPC, CCFS
Lincoln Financial Advisors
61 South Paramus Road, Suite 425
Paramus, NJ 07652

Re: CARES Act and LOSAP

Via electronic delivery

Bruce;

You have asked for guidance on whether any of the CARES Act provisions governing retirement plan distributions apply to LOSAP plan distributions.

In short, the answer is that those CARES Act retirement plan provisions do not apply to LOSAP distributions.

There is no 10% tax on LOSAP withdrawals, so the CARES act waiver does not apply; and LOSAPs do not have loans subject to Code Section 72(b), so those do not apply either.

LOSAPs which have adopted your plan document do, however, have the ability to make current distributions to volunteer firefighters who suffer an "unforeseeable emergency" beyond their control. Your document language defines unforeseeable emergencies as: "extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the participant of beneficiary."

This means that if a firefighter or family member gets COVID-19, loses his or her job because of COVID-19 related circumstances, or suffers any sort of problem arising from COVID-19, the LOSAP's Sponsoring Agency has the authority to authorize a payout from that firefighter's account.

That amount would be fully taxable as wages in the year paid to the firefighter. The CARES Act does not allow the tax on LOSAP distributions to be spread over three years, like it does for the tax on distributions from other kinds of retirement plans. There is also no ability for the firefighter to repay the amount of those distributions back to the plan, as the CARES Act allows to be done for other types of retirement plans.

Let me know if you have any other questions.

Robert J. Toth, Jr.

 

Bruce D. Linger, CFP, CRPC, CCFS
Lincoln Financial Advisors
61 South Paramus Road, Suite 425
Paramus, NJ 07652
Phone: 201-556-4564
Cell: 908-510-6069
Fax: 201-556-4511
Email: Bruce.Linger@LFG.com
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Bruce Linger is a registered representative of Lincoln Financial Advisors. Securities and investment advisory services offered through Lincoln Financial Advisors Corp., a broker/ dealer (member SIPC) and registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies.

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