New Updates: Date: 21 April, 2020
IRS Form 5500 (annual return/annual report of employee benefit plan) for ERISA 401(a), 401(k) and 403(b) plans:
Ordinarily IRS Form 5500 must be filed by the last day of the 7th month following the close of the plan year. (Note: that, to date, the IRS has not yet provided relief for the Form 5500 Annual Return/Annual Report for calendar year plan years ending December 31, 2019. If a Form 5500 was required to be filed between April 1, 2020 and July 14, 2020, the due date is extended to July 15, 2020. Absent additional relief, the deadline for Form 5500 Annual Return/Annual Report returns for calendar-year plans remains July 31, 2020).
Deductible contributions for 401(a) and 401(k) plans:
The deadline for a for-profit employer to make deductible contributions is ordinarily not later than the due date for the employer’s filing of its federal tax return. If the employer’s federal tax return filing date was between April 1, 2020, and July 14, 2020, the due date for contributions is extended to July 15, 2020.
Updates: Date: 10 April, 2020
FREQUENTLY ASKED PLAN-RELATED QUESTIONS DUE TO CORONAVIRUS:
DOES YOUR PLAN NEED A RE-DESIGN DUE TO COVID-19?
Possibly, but we generally design plans with built in flexibility that allows plan sponsors to adjust how they use their plan rather than requiring complete redesigns. If you’re unsure what possibilities your plan currently has, feel free to connect with your plan’s consultant to discuss further.
DO THE REGULATIONS ALLOW EMPLOYER CONTRIBUTIONS TO BE STOPPED?
Generally speaking, yes, they do. They are called “mid-year changes”. For reference, here are two requirements plans must meet in order to:
- give participants a supplemental notice regarding the reduction or suspension; and
- will not reduce or suspend employer contributions until at least 30 days after receipt of the supplemental notice.
WHAT SHOULD I CONSIDER PRIOR TO SUSPENDING SAFE HARBOR CONTRIBUTION?
- Top-Heavy Plans. Ceasing a Safe Harbor contribution does not exempt the plan from the top-heavy rules. If the plan is top-heavy and Key employees receive any type of contribution (including their 401(k) elective deferrals) for the plan year, then top-heavy minimum contribution still would need to be funded.
- A Plan amendment and a 30 Day Notice to Employees is required to suspend safe harbor contributions. There is an additional cost associated with the amendment generation.
- Safe harbor contributions must be made through the effective date of the suspension and non-discrimination testing must be completed for the entire plan year, and not just the portion of the plan year during which the plan sponsor was not making safe harbor contributions.
- If a safe harbor is removed, an amendment will be required to add back the Safe Harbor provisions for the future year(s). Safe harbor suspensions cannot be indefinite. According to IRS guidance, a plan sponsor may suspend contributions for three out of five plan years without the suspension being treated as a permanent discontinuance of contributions.
ANY OTHER COMPLIANCE ISSUES I MAY WANT TO CONSIDER?
While it is important to consider your plan’s specifics, the following three issues are the most common we have been asked about.
- Successor Plan Rules: If you are considering terminating your plan as a temporary solution, there are “successor” plan rules that generally prohibit covering the Plan Sponsor from covering the same employees in a new plan for twelve months following the termination. In other words, there is a minimum amount of time that must pass before re-starting a new retirement plan. Consider the impact of not having a retirement plan for the next two to three years.
- Partial plan termination. Plan sponsors who continue their plans but are laying off employees should be aware that this may trigger a partial termination of the plan. A partial termination is determined on the facts and circumstances, but plan sponsors should look to the IRS rule of thumb that there might be a partial termination if more than 20% of their plan participants are involuntary terminated. In the event of a partial termination, affected participants are required to be 100% vested.
- Loans and Distributions: Employees who are “temporarily laid off” or “furloughed” – someone who is intended to be called back to work is not considered terminated for retirement plan purposes and not eligible for a distribution unless the plan allows for in-service distributions. For Participants who have loans: In general, loan repayments may be suspended for up to a period of one year if employee is on an authorized leave of absence i.e. (furloughed). Upon returning to work. Loans installment payments must resume immediately and may be no less than the payments made before the leave of absence.
We hope this information helpful. As always, please be sure to discuss any potential changes being considered with the plan’s consultant prior to taking any action. We understand there are many moving parts with retirement plans – we’re here to help you navigate them!
As COVID-19 impacts us all nationwide, The Ryding Company is well prepared to manage this crisis with our proven business continuity plans and protocols, which include the ability for our employees to work remotely and seamlessly support our customers while keeping themselves safe.
We will continue to monitor the situation closely and will make additional adjustments as needs arise. Rest assured, we are putting measures in place to help our employees so they can continue to serve you best.
We are proud to serve you, and thank you for being a valued customer.
Best wishes and good health to you all!