RatherBeGolfing

But only if the participant is a qualified individual, right? If I don't the definition of qualified individual, I don't get tax relief. So you would still have to ask all the CD/CRD questions (regardless of plan adoption) just to figure out if 10% default or 20% required applies. If you fail to withhold when you have to, that could be an issue too.

Follow up from above... So what if I took $120,000 distribution today, from a plan that elected to not adopt CRDs. 10% default on the first $100,000 and 20% on the last $20,000?

I think you guys have changed my mind on how it applies to the participant, in other words participant tax treatment is separate from plan treatment. I'm still struggling with the withholding part though, since the plan is required to withhold. And if you don't adopt the optional CRD, I guess you would still have to amend if withholding changes applies regardless of CRDs...

It does. It means you get to add the delayed period to the remaining term and add accrued interest. This also tracks with the IRS guidance in Notice 2005-92 in regards to KETRA 103 which is pretty much identical to 2202(b)

Agreed

No. You can only treat it as a CRD if the CRD is offered by the plan. Otherwise it is just a distribution. Correction: Yes...

participant cannot treat a distribution as a CRD if the plan does not offer CRDs... Correction: participant can treat a distribution as a CRD for tax purposes even if the plan does not offer CRDs... No. If the plan does not permit CRDs, the cat is officially dead. Correction: The cat is jumping around in the CARES box...

ARA has requested relief from testing due to suspension of safe harbor contributions during the this crisis.

not200592.113005.end.pdf Notice 2005-92 Loans discussion starts on page 14 (Section 5) Safe harbor is found under Section 5 B on page 15

Correct. The 10% default withholding (rather than 20%) and early distribution penalty relief applies to CRDs only. Other than that, its business as usual. Correction: 10% default would apply for a qualified individual, even if the plan does not adopt CRDs as a distributable event.

Right, but you stopped it, why should you be entitled to the benefits?

This is no different than any other feature that a plan could offer but decides not to offer. Correction: Participant IS still eligible for tax relief The reduced hours are immaterial since the plan does not offer coronavirus-related distributions. Yep. Correction: I guess not until you hit the $100,000

Yea its a mess for sure, especially since we can probably expect the loan delay to be optional even if you adopt CVLs.

Correct, but those are the payments that are delayed. So if the first scheduled payment I delayed was was 4/1/20, that payment has to be repaid 4/1/21. The last payment that can be delayed for a year would need to be scheduled on or before 12/31/2020. Since payments post 12/31/20 cannot be delayed, you would pay your regular scheduled payments until your year of delay is up. In my example, that would be 4/1/21, and that is why I re-amortize as of 4/1/21. I suppose since I delayed repayment and did not re-amortize until after 12, months, I can add 12 months to the end of the loan, rather than the 9 months of no payments at all. But if I re-amortize as of 1/1/21, I start paying on that delayed payment after 9 months, and I should only get to add 9 months to the loan term.

(A) makes it clear that it applies only to payments between enactment and 12/31/2020. There is no other way to interpret that. I interpret subsequent repayments in (B) to mean the subsequent repayment of the delayed payments, adjusted for interest. It means that rather than re-amortizing the remainder with accrued interest over the original loan term, you get to add the delay to the loan term If it was meant to apply to other payments, there is no need to limit the period in (A), they could have just said no loan payments for the next 12 months. (C) is your exception to the loan term limit for the time you add back to the delay. I agree with @MoJo, plain reading of the statute is clear on which payments may be delayed. It is not logical to read "subsequent repayments" in (B) to mean payments in addition to the payments explicitly limited in (A). Logically, (B) refers to the subsequent repayment of the delayed payments, allowing you to extend the repayment term for the period of delay, but requiring that you add interest. In order to not have a conflicting statutory requirements, (C) tells you to ignore the delay added on in (B) for purposes of the maximum term under 72(p).

The way I looked at it, if you delay payments for a shorter period, you can only add that shorter period to the loan term. So, if I suspend loan payments for 9 months and re-amortize on 1/1/21, I can only add 9 months to loan term.

What he said.

I think the only other difference is I added the 9 payments I skipped at the end, and I think you added a full year right?

$50K loan, 5% interest, monthly payments starting 7/1/19. 4/1/20 - 12/1/20 payments delayed. 1/1/21-3/1/21 payments per original schedule. Balance remaining after 3/1/21 payment re-amortized over remainder of original term plus 9 months. Monthly payments increase from $943.56 to $982.04 as of 4/1/21. CARES Amt Sch.pdf

5 Year term , Monthly payments, #10 due 4/1/20 #10-18 delayed by a year #19 is due 1/1/21 #20 on 2/1/ #21 on 3/1/21 #22-60 & #10-18 are re amortized as of 4/1/21 as payments #22-69, Final repayment date is 6/10/24 3/1/25 rather than original 6/1/24. *edited to fix a date

How is it harder? A simple snap on amendment by 2022 and you dont have an issue.

The plan can force a distribution, but the distribution would not be an RMD...

Yep, that is what I'm seeing too. Some are adding both, most are adding one, some are not adding them at all (at least until absolutely necessary). As a "wholesome employer" moment, I spoke to a small employer yesterday where the owners are maximizing the CVD loan and distribution to not lay off or furlough the employees. They hope that between CVD loan/dist and PPP, they can continue to pay employees until business can start bringing money in again.

No