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From the President

Well, where to begin? It has been a strange, almost surreal, couple of months for all of us. I hope everyone is staying safe and healthy during this pandemic. 

I always value my membership in ASEA, but it has become even more important during this time of economic uncertainty. Between the brain power on the Google Group and ARA/ASEA advocating for private sector retirement plans, we members benefit greatly.

There has been much communication about Coronavirus relief, so I thought I would summarize some of the key issues pertaining to defined benefit and cash balance plans. 

In-Service Withdrawals. The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 provides for in-service withdrawals at age 59½ (rather than age 62). This provision is optional and requires a plan amendment. Employers may consider adding this option if they are looking for ways to assist participants during this COVID-19 pandemic.

Extension of Tax Filing Deadline. On March 21, the IRS issued Notice 2020-18 that extends the deadline for filing federal income tax returns from April 15 to July 15. The deadline for making deductible retirement contributions for 2019 was extended accordingly.

Coronavirus-Related Distributions Under the CARES Act. On March 27, the President signed the Coronavirus, Aid, Relief and Economic Security (CARES) Act of 2020 into law. Section 2202 addresses special permissible coronavirus-related distributions (CVRDs).

A CVRD is a distribution to a “CVRD Qualified Participant” that is taken on or after Jan. 1, 2020 and before Dec. 31, 2021. Note that the participant must have a permissible distributable event, such as termination of employment or attainment of an eligible age for in-service distributions.

This provision is optional and is requires a plan amendment. The deadline to amend the plan for the CARES Act is the last day of the first plan year beginning on or after January 1, 2022 (i.e., Dec. 31, 2022 for a calendar year plan). Plans may operationally allow for CVRDs before the plan is amended. 

A CVRD Qualified Participant is a participant who meets at least one of the following three requirements:

  1. Has been diagnosed by a test approved by the CDC with COVID-19
  2. Whose spouse or dependent has been diagnosed by a test approved by the CDC with COVID-19
  3. Has experienced adverse financial consequences because of being:
    1. quarantined, furloughed, laid off, or who has reduced work hours that is due to COVID-19;
    2. unable to work due to lack of childcare resulting from COVID-19;
    3. an owner of a business that closed or has experienced reduced hours because of COVID-19; or 
    4. any other factors determined by the Secretary of the Treasury.

A participant’s CVRD cannot exceed $100,000 (or their vested lump sum/account balance, if less) from all plans maintained by the employer, including plans within a controlled group or affiliated service group. The 10% early withdrawal penalty tax is waived, and the pre-tax portion of the CVRD is subject to normal taxation. However, the participant may choose to spread the taxable income evenly over 3 taxable years starting with the 2020 tax filing. Such distributions are not treated as eligible rollover distributions for purposes of withholding, so are therefore not subject to mandatory 20% federal tax withholding. Rather, they are subject to the default withholding rate of 10%, unless otherwise elected by the participant.

Single-Employer Plan Funding Rules Under the CARES Act. On March 27, the President signed the Coronavirus, Aid, Relief and Economic Security (CARES) Act of 2020 into law. Section 3608 addresses single-employer funding rules. 

Extension of Contribution Deadlines. The CARES Act provides for a delay in contribution deadlines. Any contribution due in calendar year 2020 (including quarterly contributions) now has a delayed due date of Jan. 1, 2021. The employer must pay interest on delayed contributions, from the original due date to payment date, using the effective interest rate for the plan year that includes the payment date.

Benefit Restriction Relief. The CARES Act allows employers to treat the AFTAP for the plan year ending in 2019 as the AFTAP for the plan year ending in 2020. 

Extension of PPA Restatement Deadline. Also on March 27, the IRS issued guidance via their website that extends the due date for restating pre-approved defined benefit and cash balance plans for PPA from April 30 to July 31. The end of the second six-year remedial amendment period is also extended to July 31.

Extension of Form 5500 and Form 8955-SSA Deadlines. On April 9, the IRS issued Notice 2020-23 that extends the filing due date of Form 5500 series to July 15, 2020 for forms that were originally due between April 1, 2020 and July 14, 2020. This extension also applies for Form 8955-SSA. The DOL’s EBSA Disaster Relief Notice 2020-01, issued on April 28, also acknowledges this relief.

Extension of PBGC Premium Payments and Other Deadlines. The IRS extension of the Form 5500 deadline automatically triggers the PBGC’s disaster relief policy, and on April 10 the PBGC extended due dates in a press release. It applies to filings or actions that would have otherwise been due between April 1, 2020 and July 14, 2020. The extended due date is July 15, 2020. Note that certain filings and actions are not covered by the disaster relief announcement and would require an extension on a case-by-case basis: Form 10-Advance, Form 200, and Form 10 for failure to make required contributions under $1 million, inability to pay benefits when due, liquidation, loan default, and/or Insolvency or similar settlement. It also does not cover actions related to distress termination for with PBGC has issued a distribution notice.

Extension of Deadline to Furnish Participant Notices and Disclosures. On April 28, the DOL issued EBSA Disaster Relief Notice 2020-01 that extends the time for plan officials to furnish benefit statements, annual funding notices, and other notices and disclosures required by ERISA that were originally due between March 1, 2020 and 60 days after the announced end of the COVID-19 National Emergency, so long as they make a good faith effort to furnish the documents as soon as administratively practicable. While not specified in Notice 2020-01, these notices may include individual benefit statements, annual funding notice, SPDs and SMMs, 204(h) notices, 101(j) notices, and suspension of benefits notice.

We will keep you informed as we receive more guidance and relief. In the meantime, stay safe. 

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