Congratulations to Morgan Lewis partner Handy Hevener, who has been honored with a Lifetime Achievement Award by the New York Law Journal as part of its 2020 New York Legal Awards. The Lifetime Achievement Award is given to lawyers who have made a significant impact on the legal community throughout their career. Handy has made significant contributions throughout her 42 years of practice, particularly in relation to critical payroll tax, fringe benefit, executive compensation, and contingent workforce issues. Handy and the other winners are set to be recognized at an October 27 ceremony in New York.
IRS Notice 2020-51, released last week, provides additional guidance on the waiver in 2020 of required minimum distributions (RMDs) from defined contribution retirement plans and IRAs, and the interaction of this waiver with Section 114 of the SECURE Act. The SECURE Act changed the required beginning date for an employee or IRA owner to begin taking required minimum distributions to April 1 of the calendar year following the calendar year in which the individual attains age 72 (rather than April 1 of the calendar year following the calendar year in which the individual attains age 70½), for individuals who attain age 70½ after December 31, 2019.
The Notice clarifies that the 2020 suspension also applies to individuals with a 2019 RMD who have a required beginning date of April 1, 2020, that was not paid in 2019 (and therefore would have been due to be paid between January 1, 2020 and April 1, 2020). In April, the IRS issued a notice that said those who took an RMD between February 1 and May 15 could put the money back into a plan or IRA by July 15. The new guidance expands the relief to include those who took an RMD between January 1 and February 1, and also extends the deadline for rolling the funds back into a plan or IRA to August 31. For example, if a participant received a single-sum distribution in January 2020, part of which was treated as ineligible for rollover because it was considered an RMD, that participant will have until August 31, 2020, to roll over that part of the distribution.
IRS Notice 2020-52 provides welcome relief to plan sponsors considering suspending safe harbor matching contributions or safe harbor nonelective contributions (or who already suspended safe harbor contributions during 2020) in response to the coronavirus (COVID-19) pandemic.
On June 29, the Internal Revenue Service issued guidance providing new COVID-19-related relief and other clarifications for sponsors considering mid-year changes to their safe harbor 401(k) plans. The guidance, set out in Notice 2020-52 (the Notice), provides helpful clarification that sponsors can eliminate safe harbor 401(k) contributions for “highly compensated employees” (HCEs) only and retain the plan’s safe harbor status, provided that the safe harbor 401(k) contributions continue to be made for non-highly compensated employees (NHCEs).
IRS Guidance Permits Certain Individuals Affected by COVID-19 to Cancel NQDC Plan Deferral Elections
Under IRS Notice 2020-50, employers sponsoring nonqualified deferred compensation plans (NQCD plans) may now allow employees to suspend their deferral elections without having to determine whether the employee has had an unforeseeable emergency for purposes of Section 409A or otherwise qualifies for a hardship under Section 401(k) if the employee received a coronavirus-related distribution from an eligible retirement plan.
The ongoing coronavirus (COVID-19) pandemic has greatly affected many employers and their employees. Employers sponsoring NQCD Plans are seeing an increase in requests from NQDC Plan participants to suspend deferral elections in order to deal with financial hardships resulting from COVID-19.
The US Department of Labor (DOL) published a request for information (RFI) on June 18 in the Federal Register on the subject of pooled employer plans (PEPs). The RFI provides interested parties until July 20 to submit comments to the DOL addressing potential prohibited transaction (PT) issues confronting PEPs, pooled plan providers (PPPs), participating employers, and others. Read our LawFlash for a refresher on PEPs and relevant parties.
US President Donald Trump signed the Paycheck Protection Program Flexibility Act of 2020 (the Act) on June 5, modifying certain provisions related to the forgiveness of loans under the Paycheck Protection Program (PPP). We recently published a LawFlash discussing these modifications.
In a welcome change, the Act permits employers that qualify for PPP loan forgiveness to continue to defer the employer’s share of Social Security taxes under Section 2302 of the Coronavirus Aid, Relief and Economic Security (CARES) Act.
The IRS has again extended the due dates for certain returns and payments because of the ongoing coronavirus (COVID-19) pandemic. Notice 2020-35, which the IRS issued on May 28, 2020, postpones the due date for certain time-sensitive actions related to qualified retirement plans, health savings accounts and Archer medical savings accounts, and employment taxes. With some exceptions, which are noted below, affected filings are due July 15, 2020.
Extensions
Notice 2020-35 amplifies Notices 2020-18, 2020-20, and 2020-23 that postponed the due date for various tax returns and payments to July 15, 2020. The extensions provided in this most recent IRS notice apply to certain time-sensitive actions that would have been due on or after March 30, 2020 (and April 1, 2020 in some cases) and before July 15, 2020.
In a 5-4 decision in Thole v. U.S. Bank N.A., the US Supreme Court has ruled that defined benefit plan participants lack Article III standing to sue for fiduciary breaches that do not harm the individual participants. As the Court noted, “[u]nder ordinary Article III standing analysis, the plaintiffs lack Article III standing for a simple, common-sense reason: They have received all of their vested pension benefits so far, and they are legally entitled to receive the same monthly payments for the rest of their lives. Winning or losing this suit would not change the plaintiffs’ monthly pension benefits.”
In response to the coronavirus (COVID-19) pandemic, the Internal Revenue Service (IRS) has issued new formal guidance that extends the deadline for providers of individual retirement accounts and individual retirement annuities (IRAs) to file Form 5498.
Read our LawFlash for more information on the new guidance.
Join Morgan Lewis in the coming weeks for these programs on employee benefits and executive compensation:
- Mission Critical Benefits in a Pandemic Economy | May 27 | Webinar presented by Mary B. Hevener, R. Randall Tracht, David B. Zelikoff, Saghi Fattahian and Elizabeth S. Goldberg
- Hot Topics in Employee Benefits: What We’re Seeing – June 2020 | June 9 | Webinar presented by Andy R. Anderson, Brian D. Hector, Daniel R. Salemi, David B. Zelikoff, Claire E. Bouffard and Jacob M. Oksman
