Seyfarth Synopsis: On April 9, 2020, the IRS issued Notice 2020-23, extending federal tax filing deadlines and payment obligations to July 15, 2020 for certain items otherwise due to be performed from April 1, 2020 through July 14, 2020. Notice 2020-23 extends the period for performing 44 “time-sensitive” employee benefit-related actions.

These time-sensitive actions were

Seyfarth Synopsis: Several deadlines established by the IRS to adopt amendments or restatements to employer-sponsored retirement plans, and in this instance specifically, to 403(b) plans maintained by tax-exempt entities and pre-approved defined benefit pension plans maintained by any employer, were fast approaching. On March 27, the IRS extended these upcoming deadlines giving employers who sponsor

Seyfarth Synopsis: On March 27, 2020, the House of Representatives followed the Senate’s lead in voting overwhelmingly to pass the Coronavirus Aid, Relief, and Economic Security (CARES) Act (the “Act”), which the President immediately signed into law. This post highlights the defined contribution retirement plan provisions contained in the law. Click here to review the executive compensation provision contained in the law; click here to review the health and welfare plan provisions; and click here to review the defined benefit plan provisions.

  • Tax-Favored “Coronavirus-Related” Withdrawals. Coronavirus-related distributions (“CV Distributions”) from defined contribution retirement plans (including IRAs) will not be subject to the 10% penalty that normally applies to early withdrawals. An individual may elect to include the amount of the qualified CV Distribution(s) in income over a three-year period.

Observation. While it looks like this is probably intended to be a new distribution type, we think that it is a little unclear based on the language in the Act. Some additional guidance would be helpful with respect to whether this is a new distribution right, or if it is just an exception from the penalty tax for otherwise eligible distributions that fit the criteria, with repayment rights. There is language in the Act indicating that a CV Distribution would be deemed to satisfy the 401(k), 403(b) and 457 plan distribution timing rules, which seems to support the position that this is a new distribution right. If this is a new in-service distribution right, then it should be an optional provision. Plan sponsors are not required to make in-service withdrawals available (e.g., age 59½ or hardship), so we would expect the same to apply here.

Similar to the disaster relief withdrawals provided in the past for other types of disasters, an individual may choose to repay all or a portion of the CV Distribution(s) to a defined contribution retirement plan or IRA within three years. A participant who chooses to repay is treated as having received the CV Distribution in an eligible rollover distribution, and then directly transferring it tax-free to the eligible retirement plan.

Observation. It appears that repayments are made to the plan or IRA by a participant on an after-tax basis, but until the IRS issues additional guidance, we do not know for sure how the repayment will be able to be made. If repaid to an IRA, it is not clear whether the repayment is considered a rollover for purposes of the one rollover limit per year that applies to IRAs, although the repayment of other types of disaster distributions have historically not counted toward the rollover limit.

There are a number of conditions that must be met in order to qualify for this relief:

    • CV Distributions may be taken no earlier than January 1, 2020, but before December 31, 2020.

Observation. This relief may be adopted retroactive, applying to CV Distributions occurring back to January 1, 2020. When communicating this relief to participants, plan administrators may want to consider informing participants that they may be entitled to relief in 2020 for the 10% penalty tax, provided that they can certify that a distribution made earlier in 2020 was a CV Distribution.

    • Total CV Distributions may not exceed $100,000, and may not be rolled over. When determining whether the limit has been exceeded, you take into account all plans maintained by the employer and members of its controlled group.

Observation: This will require coordination among various plans in an employer’s controlled group.

    • CV Distributions must be made to an individual who is diagnosed with the SARS-CoV-2 virus or with coronavirus disease 2019 (COVID-19), or to an individual whose spouse or dependent is diagnosed with the virus or disease. Alternatively, an individual is eligible for this relief if he or she experiences adverse financial consequences stemming from the virus or disease as a result of being quarantined, furloughed, laid off, having reduced work hours, being unable to work due to lack of child care, the closing or reduction of hours of a business owned or operated by the individual or other factors determined by Treasury.

Similar to earlier versions of the Act, diagnosis of the virus or COVID-19 must be made pursuant to a test approved by the CDC.

Observation. This would appear to exclude other types of FDA-approved tests that are being fervently developed in light of the shortage of CDC-approved test kits. However, the Act provides that plan administrators may rely on the employee that these conditions are satisfied, so it appears that actual documentation showing diagnosis of the virus or COVID-19, or of adverse financial consequences is not required. Plan administrator’s may want to discuss how this certification process will work with the plan’s third party recordkeeper. In addition, the Act refers to an “employee” when describing the certification requirement. Based on other language in the Act, it appears that CV Distributions are available to both active participants as well as terminated participants, but it would be helpful if this was clarified.
Continue Reading CARES Act Relief: Defined Contribution Plan Provisions

Seyfarth Synopsis: On Friday, March 27, 2020, in light of the far-reaching impact of coronavirus, President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which includes some relief provisions for tax-qualified defined benefit pension plans. Click here to review the executive compensation provision contained in the law; click here to review the

Updated March 28, 2020: Under the IRS safe harbor reason for a hardship related to FEMA, a hardship is available for expenses and losses for employees living or working in affected area at the time of a disaster designated by FEMA for individual assistance with respect to the disaster.  It is not clear that FEMA

Seyfarth Synopsis: As we have been raising in our series of blog posts and Legal Updates, the impact of the coronavirus is far-reaching, and there are a number of concerns relating to employer-sponsored retirement plans to keep in mind as we navigate this unprecedented situation. One such concern is retirement plan-related disaster relief. Yesterday, Senate

On Monday, March 23, at 1:00 p.m. Central, Seyfarth partners Diane Dygert, Benjamin Conley, Jennifer Kraft, Kaley Ventura, Jake Downing, and Christina Cerasale are presenting a 1 hour CLE webinar, “Employee Benefits in a Time of COVID-19.”

Keep up with the latest developments and rapidly changing laws and regulations relating to COVID-19 and your benefit

Seyfarth Synopsis: Recently a “whistleblower” leaked that the IRS had internally announced an upcoming modification to the very popular voluntary correction program (“VCP”) that would have been a significant disincentive for plan sponsors to use the VCP to report and correct plan disqualification errors. The leak went viral and sent benefits counsel and other retirement