CFP® Certificants in the News

The COVID-19-related CARES Act of 2020 was not tested on the September 2020 CFP® Exam. Only key portions of the Act will be tested on the November 2020 CFP® Exam according to CFP Board. An excerpt from the CFP BOARD KEY ELEMENTS CARES ACT 2020  follows:

“The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020, to provide fast and direct economic assistance for American workers and families, small businesses, and preserve jobs for American industries. Unlike guidance provided by CFP Board for the Tax Cuts and Jobs Act [of] 2017 and the SECURE Act [of] 2019, the provisions of the CARES Act are either temporary or will expire before the November 2020 administration of the CFP® Exam. Some provisions like the Paycheck Protection Program continue to evolve at a pace that is beyond the scope of this guidance.

CFP Board focused primarily on retirement liquidity provisions that addressed the expansion of retirement loan limitations, as well as the penalty exclusion, extended repayment window for rollovers, and income tax withholding waiver of early distributions from 401(k) Plans and IRAs. CFP Board also considered business-related provisions that include the Paycheck Protection Program, disaster relief loans, debt relief, and tax provisions designed to improve cash flow for businesses.

Other planning highlights that are not covered in this document that are major provisions of the CARES Act include federal stimulus checks to individuals & families, temporary delay on federal student loan payments, and enhanced unemployment benefits. These areas do have planning applications; however, they have less impact on planning than the changes outlined in this document.”

A careful reading of the preceding excerpt argues strongly for a primary study priority that includes:

  • Temporary waivers
    • Required minimum distributions are not required in 2020 from IRAs, Defined Contribution Category Qualified Plans, 403(b) Plans, and 457(b) Plans,
    • No premature distribution penalty for up to a total of $100,000 in COVID-19-related premature distributions taken in 2020 from IRAs and most employer-sponsored retirement plans, and
    • No 20% mandatory withholding for qualified plan distributions and rollovers taken in 2020.
  • Qualified loan-related provisions
    • Loan limits are doubled for COVID-19-related loans from qualified plans taken in 2020, and
    • 2020 qualified plan loan repayments are waived for 2020.
  • Individual Tax Relief
    • Taxpayers may report the taxable portion of distributions taken in 2020 over a three-year period.
    • A temporary increase in an individual’s maximum itemized charitable deduction for gifts of cash to public charities is available for 2020 charitable contributions.
    • Effective for 2020 and future years, a permanent charitable deduction for adjusted gross income is available for taxpayers who take the standard deduction.

The following temporary business-related portions of the ACT, while not a primary study priority, may be fair game on the November CFP® Exam:

  • Expansion of Net Operating Loss limits,
  • Deferral of payment of the employer’s portion of Social Security and Medicare taxes into future years,
  • Economic injury disaster loans,
  • Waiver of loan repayments from certain Small Business Administration loans,
  • Increase in deductible business interest expense limits, and
  • Increase in C-Corporation charitable deduction to 25% of adjusted taxable income.

Purely in the author’s opinion, the expansion of the NOL limits should be high on the student’s secondary study list – this expansion could generate significant positive cash flow for businesses with NOLs that can now be carried back to profitable years as far back as 2018.

While no one can guarantee what will and what will not be included on any specific CFP® Exam, CFP Board was careful in focusing upon what is most likely to be tested in November. Use your study time wisely!