Section 2202 of the Coronavirus Stimulus Bill allows for penalty-free withdrawals of up to $100,000 from 401(k) retirement accounts. Typically, if you wanted to withdraw money from a 401(k) retirement account prior to the age of 59 1/2 a 10% penalty would be due. Section 2202 now eliminates the penalty.
Besides the temporary elimination of the penalty you can prevent the payment of income taxes on the withdrawn amount so long as you return the money to your 401(k) account within 3 years.
Section 2202 is available to anyone who needs a “coronavirus related distribution” or is experiencing “adverse financial consequences” because of the COVID-19 pandemic.
Section 2202 makes it easier to borrow money from your 401(k) by increasing the limit from $50,000 to $100,000. It also extends the payment date for any 401(k) loans due in 2020 for up to one year.
Section 2203 waives the rules for retirees who are required to withdraw money from tax-deferred accounts and who are required to pay taxes on the withdrawals in 2020.