Leaderboard

It is up to the plan sponsor to offer this feature, it is not required, however.

Re-read your second sentence carefully....

Hey Bird - that was my initial thought as well, but while the employer could be completely unaffected, a participant might easily have a spouse, for example, who has been laid off, whatever. So I've readjusted my thinking a bit.

My feeling is that if a plan already allows loans and hardships our clients will extend those provisions. Some might add them. I'll be careful to explain that it is not required. I'll get on my stump and say I'm not so sure it is the best public policy to look to tap into retirement savings whenever a crisis arises. I'm not saying I have a better answer (and probably would have to cave in if forced to vote on such stuff) but something about "we are shutting everything down and you can take money out of your retirement to get by" doesn't sit right with me. I get it, this is extraordinary and at the end of the day probably concede that it's necessary, but the knee-jerk reaction is troublesome. I generally don't like the idea of making up rules as you go along. FWIW

No problem with any of it. We repeatedly advise our clients to make sure that they have deferral elections on file. If they don't, well, yeah, then you could have a troublesome situation in the event of an audit (or complaint - we've certainly seen situations like that brought up on the board by participants who had no idea there was a plan, let alone that it had SH match available).

2202(a)(4)(B) (B) EMPLOYEE CERTIFICATION.—The administrator of an eligible retirement plan may rely on an employee’s certification that the employee satisfies the conditions of subparagraph (A)(ii) in determining whether any distribution is a coronavirus-related distribution. "may rely on" indicates that the administrator is not required to verify that employee's claims are true. It does not prevent the administrator from requesting something to verify the claim. If the administrator knows that the claims are false, I think you have to deny the claim. You cant rely on someones statement if you know it is false. That said, I tend to agree with Mike that an employer cant know everything about its employees, even the ones they are very close to.

Plans are not required to offer loans in the first place, CARES doesn't change that. It increases the maximum amount of a loan that can satisfy 72(p) but plans which offer loans are currently free to use lower limits than those stated in 72(p) so I don't believe you would be required to increase to the new maximums.

I hate them for never answering the obvious questions when they write these damn things.

We have concluded that people can take loans while on leave/furlough. They are on leave so no payments are due for 1 year. They are on furlough and consuidered active so the employer expects them to have pay in the future, certainly within a year. And those payments, pursuant to the loan program, will be made via payroll deduction. You are eiother terminated (and eligible to close your account) or you are active (and eligible for in-service distributions and loans). There is not some third state in the middle. These furloughed people are no less a participant than any other participant who happens to be fortunate enough to receive a paycheck.

Coleboy - Yes you are correct. I understood that there were no contributions to your plan besides 401k and safe harbor. Discontining the safe harbor match in a plan like tat could be absolutely devestating in terms of expense,. I think of the fast food chain with 6 months of eligibility with just a dozen managers participating. The top-heavy minimum would be multiples of the safe harbor match. In these situations, you have but one option. And even this option only works if the business is experiencing a "substantial business hardship." If your client is experiencing a substantial business hardship the plan can be terminated and still maintain its safe harbor status. There is no other way to preserve the safe harbor / top-heavy exemtpion. Hopefully they will fix this in time through legislation. I've already begun terminating a couple of plans because of this very very stupid rule. I actually hold out hope that someone will look at this and say "these top-heavy rules are so stupid!" and just get rid of them. They are a cancer that attacks small businesses. I don;t think cancer is too strong a word. Businesses that miss this rule in a manner I described will be decimated by this obligation. And clearly some will (most often those run by ABC payroll company or XYZ bundled provider). Edit: The term "substantial business hardship" has a very specific definition. Check out the regs.

That section starts: "In the case of a qualified individual with an outstanding loan (on or after the date of the enactment of this Act)..." suggesting that even new loans (i.e., those not outstanding "on" the date of enactment, but outstanding "after" the date of enactment) would be covered as well. Deferring payments on new loans would also seem to further the goal of letting participants access the funds now (when needed) as opposed to solely providing relief for pre-existing loans.