CARES ACT Provides Flexibility for 401K Plans
The recently enacted CARES Act relaxed certain Plan Sponsor responsibilities and allowed for special distributions and loans for those affected by COVID-19. The Internal Revenue Service (IRS Notice 2020-23) and the Employee Benefits Security Administration (EBSA Disaster Relief Notice 2020-01) have recently issued further guidance for those affected by COVID-19.
This new guidance is summarized below:
EXTENSION OF IRS DEADLINES –
Many of your plan compliance responsibilities have been delayed. The most prominent of these include:
FORM 5500 DEADLINES -
Any plan that operates on a 2019 Plan Year ending in September, October, or November is not required to file a Form 5500 until July 15
CORRECTION DEADLINES -
Plans have an additional three months—through July 15th, 2020—to correct plan failures related to either deferrals in excess of IRS limits or contributions that cause non-discrimination failures.
LOAN REPAYMENT DEADLINES –
Plan participants that had an outstanding loan payment due between April 1
, 2020 and July 14
, 2020 may delay such repayment until July 15
ROLLOVER DEADLINES –
Plan participants that intended to roll over funds from one plan to another where the 60-day rollover deadline falls between April 1
, 2020 and July 14
, 2020 shall have the deadline extended to July 15
TEMPORARY GUIDANCE ON FIDUCIARY STANDARDS –
As COVID-19 has caused, and will continue to cause, significant disruptions to the normal retirement plan infrastructure, the general fiduciary standard has been clarified. For the duration of the COVID-19 crisis, the general fiduciary standard shall be satisfied provided that a Fiduciary acts reasonably, prudently, in the interest of covered workers, and makes reasonable accommodations to minimize the effects of any delays on distributions and plan compliance.
RELAXATION OF ERISA REQUIREMENTS –
The Department of Labor has relaxed the requirements of ERISA in several areas. Unless otherwise provided, these relaxed rules apply until the end of the federal state of emergency for COVID-19. The most prominent of these include:
Failure to timely remit participant contributions will be granted lenience provided the contributions are made as soon as is practicable. It is advised to make every effort to fund participant contributions as you normally have or consult your plan advisor to discuss your options
VERIFICATION PROCEDURES –
Failure to abide by plan verification procedures for distributions and loans will be granted lenience provided the failure is due to COVID-19 and a good faith effort is made to comply and correct any problems that develop.
PROVIDING NOTICES –
Failure to provide notices or other ERISA-required documents to participants from the period beginning March 1
, 2020 and ending 60 days after the end of the COVID-19 national emergency shall be forgiven provided that the notices are distributed as soon as practicable, up to a maximum of one year after their original deadline. This extends to all ERISA-required notices over which the Department of Labor has jurisdiction. These include but are not limited to:
Summary Plan Documents;
Summary(s) of Material Modifications;
Participant Investment Disclosures;
Qualified Default Investment Alternative Notices;
Summary Annual Reports; and
For more information or to learn how MLA’s 401k MEP Program might be of benefit to you and your employees, please contact Bill Male at Tax Favored Benefits at