The Coronavirus Aid, Relief, and Economic Security (CARES) Act that was signed into law on March 27 contains several emergency measures affecting retirement plans. The CARES Act gives plan sponsors the option of making available to participants, effective immediately, penalty-free coronavirus-related distributions as well as plan loans increased beyond the amount otherwise permitted under Internal Revenue Code (IRC) 72(p). Plan amendments for these provisions need not be adopted until the last day of the plan year beginning in 2022 (2024 for governmental plans). As plan sponsors eagerly put into place a portion or all of these relief measures, it is important to consider the special mid-year amendment rules that apply to safe harbor 401(k) plans.
Due to widespread court closures as a result of the coronavirus (COVID-19) pandemic, it may be difficult for participants or their attorneys to obtain a certified copy of a domestic relations order that many retirement plans require as part of the procedures for processing qualified domestic relations orders (QDROs). To address this issue, plans might consider adopting temporary procedures that allow for the continued qualification and processing of QDROs during these extraordinary circumstances without creating permanent exceptions to their normal QDRO procedures.
Internal Revenue Service (IRS) regulations require that spousal consent to the waiver of a qualified joint and survivor annuity (QJSA) that is necessary to elect an optional retirement payment form must be signed in the “physical presence” of a plan representative or notary—a requirement that is difficult to satisfy in a time of social distancing due to the coronavirus (COVID‑19) pandemic.
Many plan administrators are loathe to default all married participants into the QJSA or qualified optional survivor annuity (QOSA) simply because the IRS regulations did not contemplate the extraordinary and unprecedented circumstances caused by the pandemic or the development of technology that would protect the interests of the spouse even without a “physical presence” waiver. While available technology may provide plan administrators and sponsors with alternative means for obtaining spousal waivers, it is important for plan administrators to appreciate the issues and consider the risks.
This Insight authored by Morgan Lewis lawyers and published by Bloomberg Law poses 100 questions related to the COVID-19 payroll tax and fringe benefits provisions, which we have been explaining in our LawFlashes – including the 6.2% payroll tax deferral, leave and retention credits, PPP loans, Section 139 benefits, business expense reimbursements, and leave-sharing. Are these the questions that you and your colleagues are tackling, debating, and looking for Treasury and the IRS to answer?
The US Departments of Labor, Health and Human Services, and the Treasury (Departments) issued a set of 14 frequently asked questions (FAQs) on April 11. The FAQs are intended to offer guidance on the application and implementation of the Families First Coronavirus Response Act (FFCRA), the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), and other health coverage issues related to the coronavirus (COVID-19). The FAQs generally are applicable for the duration of the public health emergency associated with COVID-19 (which will end no earlier than June 16, 2020).
The $100,000 limit on coronavirus‑related distributions (CVRD) under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) is both an individual limit and a plan limit. Tracking and enforcing the $100,000 limit has the potential to create special compliance issues for employers and controlled group affiliates that sponsor more than one retirement plan and have individuals with an account balance under more than one of those plans.
Under the CARES Act, an eligible individual—that is, an individual who satisfies the requirements to be eligible to take a CVRD (discussed in in more detail in our prior blog post)—may take CVRDs during calendar year 2020 of up to $100,000. This individual limit applies in the aggregate to all CVRDs from the individual’s IRAs and employer‑sponsored retirement plans.
Due to the economic and financial upheaval caused by the coronavirus (COVID-19) pandemic, many employees are asking their employers if they are able to cancel their deferral elections and/or receive accelerated payments from their nonqualified deferred compensation plan accounts to help offset financial difficulties they may be facing.
Generally, Internal Revenue Code Section 409A and the regulations promulgated thereunder do not allow for the alteration or cancellation of deferral elections or the acceleration of payments under plans subject to Section 409A. However, Section 409A does allow for the cancellation of a deferral election and/or acceleration of payments if an employee experiences an “unforeseeable emergency” within the meaning of Section 409A.
The Coronavirus Air, Relief, and Economic Security (CARES) Act signed into law on March 27 includes an allocation of $200 million to the Federal Communications Commission (FCC) to support telehealth services and $125 million to the US Department of Agriculture’s Rural Utilities Service to expand its existing distance learning, telehealth, and broadband initiative.
Read our LawFlash that includes a summary of these provisions.
The IRS has extended the last day of the Initial Remedial Amendment Period for Section 403(b) plans from March 31, 2020 to June 30, 2020. As described in our earlier LawFlash, the Initial Remedial Amendment Period permits employers to correct form defects in their plan documents retroactive to as far back as January 1, 2010. The IRS determined that under the current circumstances, it was appropriate to extend the deadline given the current strains on tax-exempt employers.
As the effects of the coronavirus (COVID-19) pandemic hit the United States, downsizings and shutdowns are spreading indiscriminately throughout the economy. Employers who are complying with “shelter in place” regulations and attempting to mitigate these extraordinary economic challenges with layoffs should keep in mind that such unprecedented actions may still involve complying with routine regulatory obligations.