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Hello! I happen to be familiar with IRS Notice 2020-61, which came out today, covering the deferral of 2020 contributions to 1/1/2021 under the CARES Act. I found the Notice to be very confusing, so I thought I would start this thread as a PSA, to give pension actuaries a leg up on understanding this. This post will explain how & what interest rates are to be used in connection with DB contributions originally due during calendar 2020 under Notice 2020-61. Under 2020-61, the CARES Act EIR rule (i.e., contributions are adjusted at the EIR of the plan year containing payment date) applies for payments actually made from January 1, 2020 through midnight on January 1, 2021 (or January 4, 2021 if the provision in the current Senate stimulus bill passes). For contributions that were originally due during calendar 2020 not yet paid by midnight, January 1, 2021, the CARES Act EIR rule expires. What replaces the CARES Act EIR rule (for unpaid amounts from 2020) is a modified version of 430(j); the modifications are that the quarterly & catch-up due dates are moved from calendar 2020 to 1/1/2021, and the quarterly contribution amounts are increased (with the EIR from the plan year they pertain to) to 1/1/2021. So, for example (which is unfortunately not included as a Notice 2020-61 example), say you have a calendar year plan, with a 1/1 valuation date, not subject to quarterly contributions in 2019. Say the 2019 contribution is made on 1/1/2021. To determine whether the 2019 MRC has been met, you must discount the contribution back to 1/1/2019 at the 2021 EIR. If instead, the contribution was made on 12/31/2020, you must discount the contribution back to 1/1/2019 at the 2020 EIR. The following chart is intended to help you walk through examples provided in Q&A 2 through 6: Notice Example Topic: Discounted contributions @ val date Topic: Adjusting QRC with interest to 1/1/21 PY contribution is for EIR used: orig due date to 1/1/21 Why? Payment dates used A-2 Yes 2019 2020 CARES Act EIR rule 12/31/20 A-3 Yes 2019 2020 CARES Act EIR rule 12/31/20 A-5 Yes 2020 2020 CARES Act EIR rule 12/31/20, 6/1/20 A-6 Ex 1a Yes 2020 2020 Expiration of CARES Act EIR rule; modified 430(j) Not paid by 1/1/21 A-6 Ex 1b Yes 2020 2020, then 2020+5% Modified 430(j) 2/15/21 A-6 Ex 2a Yes 2019 2019 Expiration of CARES Act EIR rule; modified 430(j) Not paid by 1/1/21 A-6 Ex 2b Yes 2019 2020 for 12/15/20 payment; 2019 for unpaid at 1/1/21 CARES Act EIR rule; Expiration of CARES Act EIR rule; modified 430(j) 12/15/20, nothing else paid by 1/1/21

Shouldn't be too hard to hash out, if you check your trust provisions themselves. There might be language saying the Employer, when announcing the trustees, can assign specific duties within any group of more than one. I can also imagine whoever might direct the affairs over the business (after the owner's death) would then have the authority to name successor trustees to the plan sponsored by that business.

The question I have is "why are you asking"? To most of us practitioners, the idea of employer vs plan cost matters when you have a trust. If you don't have one -- it's an academic question.

The examples in A-5 and A-6 adequately cover the adjustments required for 2020 quarterly installments due during 2020, however the notice included no mention of what to do with the 2019 4th quarter installment due on January 15, 2020. Here is my analysis, based on the guidance provided in the notice: The January 15, 2020 installment, or any portion of it that was unpaid as of January 15, 2020, is increased at the 2019 effective interest rate to the date of payment, not later than January 1, 2021. The 2019 funding contribution will not be made later than January 1, 2021, therefore the penalty discount rate (2019 EIR + 5%) will never apply to this installment. The contribution is discounted at the 2019 EIR from the date paid to the valuation date, the same as if the quarterly installment requirement did not apply. Therefore, this has the effect of eliminating the 4th quarter installment for 2019. Do you agree? Did I miss something in the notice?

I agree with Luke and I'm not a CPA either. However, the NASPP newsletter (Barbara Baska) has a good example of how accounting works if a partially vested option upon termination of employment is accelerated and becomes fully vested. It's not treated a a new grant as to the portion of the award that has already vested. It is a new grant as to the newly vested portion. Here's her example: "Sa that an employee terminates while holding an award to purchase 10,000 shares that is 75% vested, and the company modifies the terms of the award to accelerate vesting on the remaining 2,500 unvested shares. Further assume that the fair value of the award at grant was $10 per share, and the fair value at the time the modification occurs is $16 per share. The fair value of the vested portion of the option is $75,000 ($10 per share multiplied by 7,500 shares); this expense has already been recorded and is not reversed. The original fair value of the unvested/accelerated portion of the option was $25,000 ($10 per share multiplied by 2,500 shares). Let’s say that the termination occurs after one-fifth of the last vesting period has elapsed, so that the company has already recognized $5,000 of expense for this tranche (assuming straight-line accrual and that the company accounts for forfeitures as they occur). The $5,000 of expense that has already been recognized is reversed and the remaining $20,000 of expense is never recognized. The fair value of the unvested/accelerated portion of the option after the acceleration is $40,000 ($16 per share multiplied by 2,500 shares); this amount is recorded as expense in the period in which the acceleration occurs.

Agree with you and Bill Presson. BTW, Non-Electing Church 403(b) plans are different than Non-ERISA 403(b) plans. If you accept this client, and are sure it is a "church," be sure to use a plan document format intended for church plans and not one intended only for a Non-ERISA 403(b) sponsored by a NonProfit which is not a church. A good thing to check would be a provision for employer contributions. Non-Electing (which translates into Non-ERISA) Church plan documents have employer contribution provisions in them and a document for a NonProfit sponsoring a Non-ERISA 403(b) does not contain employer contribution options. Have a great day! PNJ

Does the plan currently allow for in-service withdrawals? You mentioned the husband's age, but the wife must also be at least age 59-1/2 for an in-service withdrawal, CRD or otherwise. Make sure the distribution is not restricted under either 1.401(a)(4)-5(b)(3) or 436(d).

Without (yet) addressing EVERYTHING in your post, I want to say that the 2020 Effective Interest Rate only applies to contributions deposited between September 16 and December 31, 2020. Furthermore, this 2020 rate only applies to discounting the contribution amount back to September 15, 2020, with the remaining discounting (back to 1/1/2019) using the 2019 Effective Interest Rate. Contributions deposited on or before (the original due date) September 15, 2020 are discounted using the 2019 Effective Interest Rate. P.S. I was disappointed to see that the IRS rules did not "technically correct" the error in the law. That is, ALL discounting should be at the 2019 rate, to be consistent with all prior rules under PPA. ... Jeff