We have a situation wherein the Plan Sponsor is in the process of selling the assets of the company, the employees will all terminated from seller payroll and hired by the purchaser. The seller made the SHNE contribution for all those employees through the date of their termination of employment.  The name of the plan has remained in the name of the sellers.

The sellers will be changing the name of the company and I assume will file corporate registration under the name of the new corp with respective EINs. 

The sellers will be the only employees in the new corp and will have W-2 income.  

Q- I assume termination resolution would be effective as of the date of sale, and would be in the name of the seller's corp?            In order to avoid any IRS communication (which, on prior experience is unavoidable), I assume Form 5500-SF for 2020 would be in the name of the new corp and Item 4 would show the name of the old corp with the old EIN?  We have had a lot of headaches in the past with IRS not looking at Item 4 on the 5500s and clients have received numerous LTRs and Notices asking for 5500s.

Anyone figure out what the new relief for plan loans means under IRS Notice 2020-23? Are loan repayments automatically suspended until July 15? 

From the Notice:

The Secretary of the Treasury has also determined that any person performing a time-sensitive action listed in either § 301.7508A-1(c)(1)(iv) – (vi) of the Procedure and Administration Regulations or Revenue Procedure 2018-58, 2018-50 IRB 990 (December 10, 2018), which is due to be performed on or after April 1, 2020, and before July 15, 2020 (Specified Time-Sensitive Action), is an Affected Taxpayer.

From Rev Proc. 2018-58:

Statute or Regulation Act Postponed -. Sec. 72(p)(2)(B) and (C), and Sec. 1.72(p)-1, Q&A10 A loan from a qualified employer plan to a participant in, or a beneficiary of, such plan must be repaid in accordance with the timing requirements of section 72(p)(2)(B) and the level amortization requirement of section 72(p)(2)(C) (taking into account, if applicable, any cure period granted pursuant to § 1.72(p)-1, Q&A-10(a)).

Hello,

Do you know if the April 15th deadline for Distribution for Excess Deferrals (participant worked at 2 companies during the year and exceeded the Deferral Limit when we look at the total Deferrals) is now July 15th for 2020 due to COVID? It seems like it should be because that's the new tax deadline, but just wanted to make sure.

Thanks.

At least, according to my old coffee Mug, April 20th is the official day.

Makes a good excuse for a former 'links' contributor to finally post a meaningful message. 

Sorry, I just need for my own edification, a definitive answer, as I can't seem to find on ERISAPedia...

You can, according to regs, distribute a balance of >$5,000 to someone of NRA without consent.

My example would be ex-partner in a law firm, with a balance of $2m+, in which case you could fully liquidate the positions and roll over to an IRA without consent assuming all regulatory requirements have been met?

This seems like the definition of an administrative nightmare. 

Thoughts?

The CARES Act provision for COVID-19 distributions is different from the provision liberalizing the loan rules. The provision for distributions merely describes what a plan can do and not violate the qualification rules, as well as the tax treatment for the participant of Covid-19 distrributions. Clearly, the employer must implement the distribution provisions through an amendment or through a policy change eventually backfilled by an amendment in order for the distribution provisions to apply to a participant.

However, the CARES Act loan provision regarding the 1-year payment extension (Section 2002(b)(2) of CARES Act) can be read as a command regarding the administration of a loan. It does not say the equivalent of, "Hey employer, if you want to change your loan policy, you can do the following without having a distribution under 72(p)," but rather it says,

"(A) if the due date pursuant to subparagraph (B) or (C) of section 72(p)(2) of such Code for any repayment with respect to such loan occurs during the period beginning on the date of the enactment of this Act and ending on December 31, 2020, such due date shall be delayed for 1 year..." [emphasis supplied].

The problem is that loan payments aren't really due pursuant to the referenced subparagraphs of Section 72(p)(2), but rather pursuant to the loan's legal documentation, which presumably complies with 72(p). So you can interpret this (or not) as meaning that to the extent the loan documents incorporate 72(p), they are overridden as to the one-year extension. Moreover, the CARES Act loan provisions for the 1-year suspension say nothing about amending loan documents or policies, although I guess you could argue that Congress thought plan documents contained loan rules, which obviously is not typically the case, and therefore would need to be amended for the suspension.

Another ambiguity, I think, is regarding what payments have a "due date." Suppose a participant who qualifies for the COVID provisions terminated a month or two before 3/27/2020 and under the terms of his or her participant loan, the remaining balance is accelerated and due as a lump sum 3/31/2020, or it will be distributed as an offset? Is the lump sum repayment suspended for a year? If it isn't and a loan offset distribution occurs, is that distribution a COVID-related distribution qualifying for the 3-year averaging, extended rollover, etc.? What if the employee has not terminated, but payment could not be made by withholding for some reason beginning in the fourth quarter of 2019, so that 3/31/2020 was the last day of his/her grace period. (Again, assume the participant does qualify as a COVID-19-affected individual.) If you don't buy my first argument that the requirement to bring the loan current as of 3/31/2020 is suspended for a year, is the resulting "deemed distribution" a COVID-19 distribution?

Are there any provision(s) required in a FICA Alternative 401(a) plan which would prevent the addition of a CARES Act distribution provision? 

Thanks   

Patricia Neal Jensen

QBI/Ascensus

If I recall, one of the provisions of the SECURE Act was that plan sponsors could adopt a new 2020 plan up through the date of their tax filing deadline next year.

(presume calendar year for the plan and client's tax filing, please)

Some sponsors may want to freeze their plans now ahead of folks getting into 1000-hour range for benefit accrual.

If there was no plan, I'd think the sponsor could start a new plan up at some point in 2021. 

But that's not the exact same fact pattern as the sponsor un-freezing an existing plan in 2021 for the 2020 year before their tax deadline.

I wouldn't have to get a decision from clients by 12/31 to un-freeze, would I?  (I hope the alternative isn't to adopt a new plan and merge them.)

Thanks....

Hello,

We have a plan sponsor who will be hiring an intern for 90 days who will be paid by the military through a military internship program. After the 90 day period, the intern will be paid by the plan sponsor. The plan has no eligibility requirements and no excluded classes so the question came up as to when the employee would be eligible to defer and what compensation would be used. There was a debate among coworkers if the employee could use military pay to defer by personally writing a check to the plan sponsor or needed to wait until he was paid by the plan sponsor.

Thanks.

If a third party pays certain individuals' COBRA premiums, does that third party risk creating a MEWA or otherwise being deemed to be engaged in the business of insurance?  A specific example would be a hospital or other provider paying the COBRA premiums of certain of its patients, in effect in order to get reimbursement from the patients' insurer.

Hi, 

I have questions related to CARES-ACT. 

• As per the act eligible participant will be able to withdraw up to $100,000 now if a plan is Terminating and the participant has only $50,000 can the participant withdrawal the complete amount under the CARES-ACT? or does it have any anything specific related to Terminating plan and withdrawal option.  
• As we know the CARES-ACT also talks about RMD, if a participant has received his/her 1st RMD check post the Bill was passed can the person return the check back and deposit into the 401K plan? since the plan is Terminating and the participant will need to take a distribution can the person PUT back the money into the plan and then have it rolled over.  
• Does the RMD apply to anyone who has reached 70 Plus or only the eligible participants as per the bill.

Is there anything that I can refer how the CARES-ACT will apply for plans that are Terminating? any portal/website? 

Thank you and stay safe...

We use the immediate and heavy financial need safe harbor definition, including expenses incurred as a result of a FEMA declared disaster.  The regs provide the employee's principal residence or place of employment at the time of the disaster must be in an area designated by FEMA "for individual assistance with respect to the disaster." 

I interpret this to mean that just because a state/area is declared a disaster, that isn't sufficient for a hardship but rather must be eligible for FEMA's individual assistance program.  So while FEMA's site (https://www.fema.gov/disasters) provides that most, if not all, states are declared disasters due to COVID-19, only a few states appear eligible for the individual assistance program. 

I've seen conflicting interpretations stating that if a state is declared a disaster, that is sufficient for a hardship. 

Any thoughts would be appreciated! 

Any other recordkeepers struggling to keep up with the demand of distributions during Coronavirus? Argument suggestions for participants unable to time the market? Suggestions for limiting liability?

Two 401k sponsors have received calls from the Wharton Group about a new DOL requirement for a third party 5500 review, which they are offering to provide. Is this a scam or has DOL implemented a new rule to require a third party to review 5500s? Employers in question have 25 or so participants.

Of the many requests for CARES Act instructions service providers send, some ask whether a plan’s sponsor prefers a halt on minimum distributions.  Some ask that question even of a § 403(b) plan’s sponsor.  Further, some ask the question without considering that the IRS-preapproved document the same service provider furnished makes clear that the plan imposes no involuntary distribution to meet a minimum-distribution requirement.

26 C.F.R. § 1.403(b)-6(e)(2)

https://www.ecfr.gov/cgi-bin/text-idx?SID=927705f9b141c0337a5dd365003a368b&mc=true&node=se26.6.1_1403_2b_3_66&rgn=div8

26 C.F.R. § 1.408-8

https://www.ecfr.gov/cgi-bin/text-idx?SID=927705f9b141c0337a5dd365003a368b&mc=true&node=se26.6.1_1408_68&rgn=div8

Unlike most BenefitsLink posts, this one asks no question.  I put it here only so those reading for CARES Act ambiguities see another point.

Would the Participant in the example below be considered as experiencing "adverse financial consequences as a result of being quarantined" and qualify for loan deferment?

Example: Participant: has 401k loan but has not had a reduction in hours/pay due to COVID-19; Participant's Spouse: lost job due to COVID-19 (not diagnosed with COVID-19 but cannot work)

CARES Act Qualified Individual: to an individual (a) who is diagnosed with COVID-19, (b) whose spouse or dependent is diagnosed with COVID-19, or (c) who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, had hours reduced, or other factors as determined by the Secretary of the Treasury during the COVID-19 pandemic

Filing VCP for a SIMPLE IRA and the forms are asking for the 3-digit plan number.  Do SIMPLE IRAs really have plan numbers?  Should I leave it blank or just put 001 in there?  Thanks.

I represent an apprentice fund that was originally organized as a 501(c)(5) labor organization. It decided during 2019 to apply for recognition as a 501(c)(3) because it qualifies as a school. In preparing the Form 1023, there are a lot of questions about relationships and the instructions to the 1023 do not address how to respond to these types of questions. For example, Part V. line 2a asks if any of the officers, directors, or trustees are related to each other through family or business relationships. It is not clear how far family relationships extend, such as whether in-laws would be included and it is not clear from the list of trustees whether any of them are in-laws to any other trustee or officer or director. As far as business relationship, is a union trustee who is also an officer of the local union in a business relationship with him or herself or with other trustees who are similarly situated? Part V, line 1c asks whether any of the officers, directors or trustees are related to the highest compensated employees or highest compensated independent contractors who are listed in 1b or 1c above. Again they are asking about a family or business relationship. Part V, line 3b introduces a new term. It asks whether each of the officers, directors, trustees, highest compensated employees and highest compensated independent contractors receive compensation through any other organizations related to the organization through common control. I noticed that the IRS Regs at Section 1.414(c)-5 contain regulations for determining whether tax-exempts are under common control. There is not an overlap of employer trustees among any of the funds established by the local union but there is overlap on the union trustee side. In fact, one or two of the trustees of some of the funds are either also trustees of some or all of the other funds as well as officers of the local union. Given that the union local is very small in membership, it is likely that the officers ol the local, who appoint the union-side trustees would appoint themselves as trustees to one or more of their funds. Is this sufficient to give rise to common control?  Next, in Part VIII, line 15, another new concept is introduced. There, the question is whether the organization has a close connection with any organizations. What is a close connection? Is it overlapping union trustees of a small local union? Does it mean that two or more funds sometimes, often or seldom work together to accompish the same or similar goals? Since the instructions are silent, is there some guide book toward preparation of a 1023 that explains these concepts in greater detail?

I just wanted to make a quick introduction post, I hope this is a good place for it?

My name is Jeremy. I work for a small marketing agency and one of our clients is in the employee benefits business. We mostly do their SEO and link marketing. I thought joining this community might be a good way to gain further insight into the field. I do hope that is okay? Of course I'll also be on the look out for opportunities to share my knowledge and help out the community as well. Happy posting!
 

CARES § 2202(b)(1) refers to a loan “made during the 180-day period beginning on [March 27.]”

Of the many explanations law firms, accounting firms, retirement-services providers, and others have published, some describe the end of that period as September 23, and some say September 22.

Many BenefitsLink mavens are careful about how to read a text, and about how to count things.

What do you say: does the 180-day period end on September 22 or 23?