What You Need to Know About the HEROES Act
Betterment is keeping a close eye on the proposed HEROES Act with significant implications for 401(k) plans. Read everything you need to know about the HEROES Act.
HEROES Act Overview
Nothing in life is a sure thing and certainly not a bill in congress. However, the HEROES Act has recently been passed by the House of Representatives and has the potential to ultimately become an actual law. The pending legislation has a number of provisions which build on the CARES Act to support small businesses and retirement plans, including 401(k)s.
Paycheck Protection Program (PPP) Double Tax Benefit
The Paycheck Protection Program (“PPP”) is a $660 billion aid program to provide loans to companies with 500 or fewer employees.The loans of 2.5 months of expenses may potentially be forgiven as long as the business utilizes the funds in accordance with PPP provisions. The IRS recently provided guidance that expenses that were paid with tax-free PPP would not be tax deductible, which was contrary to the intent of Congress. The HEROES Act clarifies that expenses paid with tax-free PPP loan forgiveness would still be eligible as a deductible business expense.
Relaxed Loan Provisions Self-Certification
If your 401(k) includes a loan provision, the CARES Act doubled the available loan amount from the lesser of $50,000 or 50% of your vested balance to $100,000 or 100% of your vested balance. While the Corona-Related Distribution requirements allowed for self-certification, the loan provisions did not. Under the HEROES Act, 401(k) loans would also allow for self-certification.
Required Minimum Distribution (RMD) Waiver Enhancements
The CARES Act waives all RMDs for IRAs and employer plans (401(k)s, 403(b)s etc) for 2020, including first-time 2019 RMDs, which individuals may have been waiting until April 1, 2020 to make. Under the HEROES Act, RMDs already taken in 2020 (including 2019 RMDs paid in 2020) won’t be treated as a distribution as long as the funds are returned to a retirement plan such as a 401(k) by November 30th (waiving the normal IRA 60-day rollover rule and once per 12-month limitation).
Employer Defined Benefit and Multiemployer Plan Relief
While there are many provisions that would help defined benefit and multiemployer plans, there are few notable key benefits in the HEROES Act.
- DB shortfalls would be amortized over 15 years instead of 7 years
- The PBGC would be granted authority to partition a multiemployer plan to help maintain its solvency
- PBGC limits of multiemployer plans would be increased
*Vesting is simply the 401k term for ownership. You own, or are fully vested, in your own contributions at all times. Any contributions made to your account by your employer, however, is likely subject to a schedule, granting you ownership over some period of time.
Betterment is not a tax advisor, nor should any information in this article be considered tax advice. Please consult a tax professional.
Betterment 401(k) Learning Center
Recommended Content
View Betterment 401(k) resources
Financial Experts | Over-the-Phone Financial Advice
Whether you're planning for something new or just want in-depth financial advice over the phone, Betterment offers options to talk with a CFP® professional.

Saver’s Credit: Understanding the Retirement Savings Contribution Credit
The Saver’s Credit is an excellent incentive for your employees to contribute to your retirement plan. Here’s how to answer the most frequently asked questions.

Financial Wellness Begins with a Great 401(k) Plan
Adding a 401(k) plan—or improving the plan you currently offer—can dramatically improve the financial wellness of your workforce.
Ready for a better 401(k) plan?
Get startedSee details and disclosure for Betterment's articles and FAQs.