The CARES Act specifically states that a Coronavirus Related Distribution is any distribution taken between January 1, 2020 - December 31, 2020. Therefore, if an individual received his/her 2020 RMD in January & has missed the 60-day rollover deadline, can the RMD be reclassified as a CRD if the individual becomes an affected individual for CRD purposes even though not an affected individual at the time the RMD was received. I've seen interpretations of this rule that a CRD has to be received from March 27, 2020 - December 31, 2020.

Retirement contributions are a permissible payroll cost for purposes of Paycheck Protection Program loan forgiveness under the CARES Act.  However, in order to be forgiven, the expense must be "incurred" during the 8-week covered period following the loan origination.  In order to be "incurred," does the contribution actually have to be made to the plan, or is it sufficient that a tentative liability is accruing during the covered period?  (I suspect the former...  i.e., that this is handled on cash, not accrual, basis.)

Has anyone considered how this will affect plans with an "employment on the last day of the plan year" allocation condition, which would normally not be made until early in the next plan year?  Except for those with very unusual plan years, these plans will have no way of knowing who is entitled to contributions by the end of the covered period.  If it will be necessary for PPP employers who have plans with allocation conditions to pre-fund contributions in order for those amounts to be eligible for forgiveness, how are people seeing the mechanics of that handled?  Are these amounts just being stuck in a forfeiture account or some other unallocated account?

Are FFCRA wages subject to 401(k) withholding?  And the subsequent match responsibility?

QDRO entered and submitted in 2003, and contains the following relevant provisions:

1. The Alternate Payee shall receive payments from the Plan of the benefits assigned to the Alternate Payee under this Order commencing as soon as is practicable after this Order has been determined to be a QDRO or, if later, on the date the Participant commences receiving benefit payments from the Plan.  Payment to the Alternate Payee pursuant to this Paragraph shall cease on the date that payments from the Plan with respect to the Participant cease.  Survivor benefits, to the extent provided in this Order, are not affected by the provisions of this Paragraph.

2. The Alternate Payee is assigned for her lifetime 50% of the net payments after mandatory deductions and survivors benefits to be paid to Participant and Participant covenants and agrees that he shall make all proper provisions to ensure such payment of benefits to Alternate Payee and keep her as the beneficiary of any available survivor benefits.

3. The Alternate Payee shall be treated as the Participant's "surviving spouse" for purposes of the Order, the Plan or Internal Revenue Code Sections 401(a)(11) and 417.

In 2014, Participant, now re-married, submitted a retirement benefit application naming his new spouse as beneficiary and electing a 10 year certain annuity (with remainder of payments after Participant's death going to a named beneficiary) in lieu of a joint and survivor annuity.  The application was signed/consented to by his current spouse, but not the former.  Participant retired and commenced receiving annuity payments, with 50% going to former spouse/AP pursuant to the QDRO.  Participant died in 2019, with about 5 years left of the 10 year annuity.

The plan has refused to make any payments to the current spouse, even the 50% retained by participant pursuant to the QDRO, and is instead making the payments entirely to AP.

Is there an argument to be made that the phrase "The Alternate Payee is assigned for her lifetime 50% of the net payments after mandatory deductions and survivors benefits to be paid to Participant and Participant covenants and agrees that he shall make all proper provisions to ensure such payment of benefits to Alternate Payee and keep her as the beneficiary of any available survivor benefits" means that the AP is only entitled to 50% of the future annuity payments, with the other 50% going to Participant's current spouse?  Or, does the phrase "The Alternate Payee shall be treated as the Participant's "surviving spouse" for purposes of the Order, the Plan or Internal Revenue Code Sections 401(a)(11) and 417" mean that AP gets everything?

Two questions:

1. Does the 100k limit increase come with any provisions for extended loan repayments, or do they have to abide by the 5 year rule?

2. Can a qualified individual take a new loan and suspend payments immediately until 1/1/2021, or do the suspension rules only apply to outstanding loans as of 3/27/2020. Just a question of whether these rules only apply to already existing loans or new loans too...

If a plan needs to make a corrective distribution due to a 415 violation in a prior year, but the participant has since died, to whom is the distribution payable? The participant's estate? And is it reported on a 1099-R as Code 4?

EDIT: Code 4 in addition to Code E. Or just E? Still not clear to whom it is payable.

An employer has already gone out of business due to the business impact of coronavirus. All employees have been terminated. They had over 200 participants at the end of 2019. Are they able to submit their final 5500 without an audit? The business is shuttered and there is presumably no one still employed to even have the auditors in. How is this to be handled?

Hello - A client has a 401k plan with an enhanced safe-harbor match formula.  They have asked to reduce the safe-harbor enchanted match to the basic safe-harbor match for the remainder of the plan year.  (Eliminating SH provisions is a top-heavy issue). With the proper 30 day notice and plan amendment, would this be allowed?

Has anyone heard of an automatic extension of 5500s for deadlines falling between Apirl 1 - July 15, 2020?  This article from ASPPA states that there is https://www.asppa.org/news/browse-topics/irs-5500-extension-comes-short , but when our office called the IRS for guidance, they denied any knowledge of such automatic extension.

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...