As defined in the CARES Act, it appears that the exception applies to distributions from retirement accounts of the individual who was laid off, not to distributions from retirement accounts of that individual's spouse. Specifically, SEC. 2202(a)(4)(A)(ii)(III) does not mention the individual's spouse. However, the IRS has not yet issued guidance on this and the Act gives the IRS authority to expand the definition. The exact wording in the Act is:
(A) CORONAVIRUS-RELATED DISTRIBUTION.—Except as provided in paragraph (2), the term “coronavirus-related distribution” means any distribution from an eligible retirement plan made—
(i) on or after January 1, 2020, and before December 31, 2020,
(ii) to an individual—
(I) who is diagnosed with the virus SARS–CoV–2 or with coronavirus disease 2019 (COVID–19) by a test approved by the Centers for Disease Control and Prevention,
(II) whose spouse or dependent (as defined in section 152 of the Internal Revenue Code of 1986) is diagnosed with such virus or disease by such a test, or
(III) who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury (or the Secretary's delegate).
