Grimaldi & Yeung

Coronavirus Stimulus Allows Retirees to Tap Funds Early, With Little or No Penalties

 

 

 

 

 

 

 

 

“Lawmakers in Washington are making it easier for Americans struggling with the fallout from the coronavirus to draw on the trillions of dollars in their 401(k)s and other retirement accounts.”

For a limited time, Americans will now be able to withdraw money from tax-deferred accounts without penalties, under the Coronavirus Stimulus law. Rules on taking loans from 401(k)s will also be loosened up, and some retirees will be able to avoid Required Minimum Distributions (RMDs) that otherwise would have been costly, says the article “Coronavirus stimulus lets struggling Americans tap retirement accounts early” from the Los Angeles Times.

In some cases, these changes reflect what has been done for retirement savers in previous disasters. However, for the most part, these are more intense than in other events. The chief government affairs officer of the American Retirement Association, Will Hansen, says that we are now in uncharted territory as a result of the Covid-19 pandemic. The numbers of people filing for unemployment make it likely that many people will be tapping their retirement accounts.

One provision in the bill would allow investors of any age to take as much as $100,000 from their retirement accounts without any early withdrawal penalties. If the money is put back in the account within three years, there won’t be any taxes due. If the money is not put back, taxes can be paid over the course of three years. The law says that the money must be a “coronavirus-related distribution,” but the rules are loose.

People who test positive for the virus, along with anyone who experiences adverse financial consequences as a result of the pandemic, including being unable to find work or childcare, are permitted to make these withdrawals.

The bill also makes it easier to borrow money from 401(k) accounts, raising the limit on these loans from $50,000 to $100,000. The payment dates for any loans due in 2020 are extended for a year.

Retirees in their early 70s were previously required to start taking money out of tax-deferred accounts and start paying taxes on those distributions. The bill also waives these rules.

U.S. individual retirement accounts held nearly $20 trillion in assets at the end of 2019. While those amounts have certainly dropped due to market volatility, Americans still hold a lot of money in retirement accounts.

However, pre- and post-retirees need to think carefully about withdrawing large sums of money now. For pre-retirees, this should only be a last resort. Some professionals think the 401(k)-loan amount is too high and that people will jump to take out too much money, which will never find its way back.

According to a U.S. Government Accountability Office report from 2019, Americans ages 25-55 take approximately $69 billion a year from their retirement accounts. Once the money is gone, it’s not able to earn future tax-deferred returns.

 

Please call our office anytime for assistance with your retirement planning, Estate Planning, Long Term Care Planning, Medicaid or Special Needs Planning: (718) 238-6960 or info@gylawny.com. We will be happy to schedule an appointment with one of our attorneys.                                   

ATTENTION: Nursing Home, Adult Home and Assisted Living Residents: You May Keep Your COVID-19 Stimulus Check!

Grimaldi & Yeung LLP is Reposting this Important Alert from New York Legal Assistance Group (NYLAG) & The Federal Trade Commission:  

 

 

 

 

 

 

 

Attention: Nursing Home, Adult Home and ALP Residents: You May Keep Your Covid Stimulus Check!

Federal Stimulus checks and the Pandemic Unemployment Compensation checks ($600/week) cannot be counted against an individual’s financial eligibility for Medicaid or SSI.  Medicaid and SSI recipients have 12 months to spend the checks before they are counted as a "resource" for eligibility for their benefits. Residents of nursing homes, adult homes, Assisted Living Programs, and other congregate care facilities have the right to keep their stimulus checks. 

NEWS ALERT: The Federal Trade Commission just issued a blog titled, "Nursing homes and assisted living facilities: Hands off residents’ stimulus checks!"  The blog says that the facility administrators are not allowed to take the COVID-19 stimulus checks residents are receiving.  In the alert,  the FTC stated there had already been complaints about facilities taking the payments in Iowa and some other states. 

Though the NYS Dept. of Health informed local government Medicaid agencies that  the stimulus payments do not count for Medicaid eligibility  (GIS 20 MA/05), many nursing home, adult home, and ALP operators do not know this, especially since it's such a change from the usual rule that requires most of the residents' income to be paid to the facility toward the cost of their care, with the resident receiving only a small  monthly Personal Needs Allowance or "PNA." 

ADVOCACY: 

April 13, 2020, NYLAG, MFJ, & NYAIL, joined by 14 other organizations, wrote to the NYS Dept. of Health requesting  a directive to facility operators to ensure that the stimulus payments are protected for residents.  The same advocates have sent DOH  four  follow-up requests, emphasizing the urgency because the payments have already started arriving in facilities’ bank accounts.  Still, as of May 18, 2020, DOH has not issued instructions to facility administrators. 

What you can do if a resident's Stimulus check was taken by the facility?

If a resident of a nursing home, adult home, or other congregate care facility believes that their Stimulus check was taken by the facility:

• Show the operator the FTC blog and demand that the funds to be placed in the individual’s personal needs account or be transferred to the consumer in the way the consumer requests. 
• If the operator does not return the funds to the consumer:

• Call the NYS Dept. of Health Complaint unit:

o   Nursing homes: 888-201-4563

o   Adult homes/assisted living:   866-893-6772

• Report it to the NYS Attorney General Fraud unit- https://ag.ny.gov/nursinghomes (online form) or call OAG Help Line at
  (800) 771-7755.
• Report it to the FTC

For advocacy help call:

• Call the NYS Ombudsprogram for Long Term Care – operates statewide - Find your local one at https://aging.ny.gov/locationsearch/ombudsmen

• In NYC: 

o   Mobilization for Justice

• Adult Home Advocacy Project  (M-F): 877-417-2427
• Nursing Home Project  (Tues & Thurs): 855-444-6477

o   NYLAG –

• NYLAG COVID HOTLINE  929-356-9582 (10 – 1 PM Mon – Fri)
• NYLAG Evelyn Frank Legal Resources Program  212-613-7310 (Mon and Wed 10-2 PM) or e-mail eflrp@nylag.org

• Long Island - Nassau-Suffolk Law Services – see fact sheet for phone numbers
• Western NY -  Center for Elder Law & Justice  716-853-3087 (serves eight counties including Erie County)
• Other areas – use www.lawhelpny.org (click on Seniors then nursing homes) or NYS Ombudsprogram for long term care

See more COVID-19 resources at:

• https://www.nylag.org/covid19/ and
• Covid-19 Resources and Advocacy on Medicaid in New York State

What To Do If You Receive Your Deceased Relative’s Stimulus Check?

 

 

 

 

 

 

 

If you should receive a stimulus check issued to a deceased relative either by direct deposit or paper check, you may be thinking what should I do with it? Should I cash it or send it back?

That was the question many Americans faced who received $1,200 stimulus payments, in the names of deceased spouses or other family members. The Internal Revenue Service (IRS) has provided an answer:  Send the money back.

Recently, the IRS added new language to its Frequently Asked Questions page for Economic Impact Payments (i.e. stimulus checks) https://www.irs.gov/coronavirus/economic-impact-payment-information-center, states that people who have died are not eligible for payments.

As per the IRS website, a stimulus payment made to someone who died before receiving the payment should be returned to the IRS by following the instructions provided for return of the payment.  Return the entire payment unless the payment was made to joint filers and the one spouse is still living, then you only need to return the portion made to the decedent.

This is how to return stimulus payment:

If the payment was a paper check:

1. Write “Void” in the endorsement section on the back of the check.
2. Mail the voided check immediately to the appropriate IRS location.
3. Don’t staple, bend, or paper clip the check.
4. Include a note stating the reason for returning the check.

If the payment was a paper check and you have cashed it, or if the payment was a direct deposit:

1. Submit a personal check, money order, etc., immediately to the appropriate IRS location listed below.
2. Write on the check/money order made payable to “S. Treasury” and write 2020EIPand the taxpayer identification number (social security number, or individual taxpayer identification number) of the recipient of the check.
3. Include a brief explanation of the reason for returning the Economic Impact Payment.

Each state has a specific address for mailing the returned stimulus payment. For New York State residents, the mailing address is:

Brookhaven Internal Revenue Service
5000 Corporate Ct.
Holtsville, New York 11742