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IRS Extends CARES Act Deadline for DB Contributions

Government Affairs

The IRS has announced in Notice 2020-82 that it has extended the deadline by which contributions to a single-employer pension plan can be made under the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act. The IRS issued Notice 2020-82 on Nov. 16. 

The deadline for contributions under Section 3608(a)(1) of the CARES Act had been Friday, Jan. 1, 2021, but the IRS now has extended that deadline to Monday, Jan. 4, 2021. Therefore, the IRS says in Notice 2020-82, it will treat a contribution to a single-employer DB plan with an extended due date of Jan. 1, 2021 as timely if it is made no later than Jan. 4, 2021, the first business day after Jan. 1, 2021.

In extending the deadline to Jan. 1, 2021, the IRS intended to allow employers sponsoring these plans to defer these payment obligations until calendar year 2021, in an effort to help them alleviate adverse impacts on their businesses from the pandemic. But the IRS recognizes that financial institutions cannot transfer funds on the Jan. 1, 2021 due date, and that this effectively requires many employers to make these contributions before that date, which it says “would be inconsistent with the legislative intent to defer the payment obligation until calendar year 2021.”

The IRS further says that for a contribution that is made by Jan. 4, 2021, and is treated as timely, the amount of the minimum required contribution that is satisfied by the contribution (and the amount that may be added to the plan’s prefunding balance on account of any excess contribution) is determined by computing the applicable interest adjustment using the actual contribution date.

To conform the due date for relevant elections related to a plan’s funding balances to this new treatment, if the plan year is a plan year for which the extended due date for minimum required contributions under Section 3608(a) of the CARES Act applies, then the deadline for a plan sponsor’s election to add to a prefunding balance or to use a prefunding balance or a funding standard carryover balance to offset the minimum required contribution for that plan year is extended to Jan. 4, 2021.

However…

Notice 2020-82 does not affect the treatment of a contribution that is due on Jan. 1, 2021, under Section 3608(a)(1) of the CARES Act, but that is not made by Jan. 4, 2021. Thus, the computations in Example 1(b) of Q&A-6 of Notice 2020-61 (which illustrate a situation in which required contributions due on Jan. 1, 2021, under Section 3608(a)(1) of the CARES Act are made on Feb. 15, 2021) are not affected by Notice 2020-82. The IRS had issued Notice 2020-61 on Aug. 6 to provide guidance on special funding and benefit limitation rules for single-employer pension plans under the CARES Act. 

Publication

Notice 2020-82 will appear in Internal Revenue Bulletin (IRB) 2020-49 on Nov. 30, 2020.