CARES Act summary

The following is a summary of the retirement plan provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Defined contribution (DC) plan provisions

Distribution and loan relief to “qualified individuals” means either:

  • Participants (or their spouses or dependents) who have been diagnosed with a coronavirus disease (SARS-CoV-2 or COVID-19)
  • Participants who have experienced adverse financial consequences due to the virus resulting from:
    • Being quarantined, furloughed, or laid off
    • Having their work hours reduced
    • Being unable to work due to lack of childcare
    • Closing or reducing hours of a business they owned or operated

Required minimum distributions (RMDs) for 2020 are waived for profit sharing, money purchase, 401(k), 403(b), and governmental 457(b) plans. This applies to all RMDs due during 2020, including 2019 initial RMDs due by April 1, 2020.

  • 2020 eligible rollover treatment. If any portion of a distribution made during 2020 would have been treated as a RMD absent this temporary waiver, it is eligible for rollover. However, the 20% federal income tax withholding can be ignored and the distribution is exempt from the Internal Revenue Code (IRC) Section 402(f) notice requirements (rollover rights explanation).

Single-employer defined benefit (DB) plan provisions

All single-employer funding obligations due during calendar year 2020 can be delayed until January 1, 2021. Accrued interest must be added to the delayed payment(s). There is no distinction as to which plan year the DB plan contributions are due.

A plan sponsor may elect to use the single-employer DB plan’s funded status for the 2019 plan year to determine whether benefit restrictions must be administered. Benefit restrictions prevent the plan sponsor from paying “accelerated forms of distribution” such as lump sums.

The CARES Act is silent on RMDs for defined benefit pension plans.

Plan compliance/federal forms and notice distributions

Plan amendments deadline for adopting any of the relief provided under the CARES Act would be no earlier than the last day of the first plan year beginning on or after January 1, 2022 (January 1, 2024, for governmental plans).

The U.S. Department of Labor (DOL) will have additional authority to postpone certain deadlines that apply to ERISA-covered plans for a public emergency declared by the U.S. Department of Health and Human Services (HHS), which would include the current public emergency for COVID-19. We believe this will apply to ERISA compliance deadlines, such as Form 5500, annual funding notice, quarterly (or other periodic) participant statements, and others. This is not an exhaustive list. We note that it is unclear whether the postponement authority for DOL extends to Treasury or the Internal Revenue Service (IRS) for compliance deadlines under IRS authority.

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