IRS Notice 2020-23 was issued on April 9, 2020, to provide relief during the COVID-19 pandemic. Included are the following 10 key retirement plan actions that now have a deadline of July 15, 2020, if the previous deadline falls during the period of April 1, 2020, to July 14, 2020. It’s important for plan sponsors to understand under what circumstances they may or may not apply. You can find the complete list and descriptions of eligible retirement plan actions in Section 8 of Revenue Procedure 2018-58.
Ten of the significant deadlines extended for retirement plans
1 Deposit of employer contributions for deductibility purposes
Prior guidance (Notice 2020-18) extended the deposit deadline to July 15 for employers with an April 15 tax return due date. This relief has been expanded, and is now available to any employer whose tax return due date (or extended due date) falls during the period of April 1 to July 14.
2 60-day rollovers
The extended deadline of July 15 applies if the 60th day falls during the period of April 1 to July 14. This extension is helpful for required minimum distributions (RMDs) issued February 1, 2020, through May 15, 2020; however, distributions issued in January aren’t eligible for the extension, since the 60th day falls outside the period of April 1 to July 14.
This extension does not apply for after-tax (including Roth) rollovers to a retirement plan (other than an IRA) or to rollovers by non-spousal beneficiaries, since they can only be made through a trustee-to-trustee rollover.
3 Required minimum distributions (RMDs)
The extended deadline of July 15 applies to RMDs that are required to be made during the period of April 1 to July 14.
The Coronavirus Aid, Relief, and. Economic Security (CARES) Act waives RMDs for 2020 for defined contribution and governmental 457(b) plans. The waiver, however, does not apply to defined benefit (DB) plans or tax-exempt 457(b) plans.
An RMD from a DB plan or tax-exempt 457(b) plan that has a required beginning date of April 1, 2020, may now be extended to July 15, 2020. This is good news for those who may have misunderstood the limitations under the CARES Act.
4 Refunds for failed ADP/ACP test to avoid excise tax
Refunds generally must be distributed within two and a half months—and six months for an eligible automatic contribution arrangement (EACA) plan—to avoid a 10% excise tax. The July 15, 2020, deadline extension applies if the regular deadline falls during the period of April 1 to July 14.
Unfortunately, this extension does not apply to calendar-year plans (other than EACA plans), since the refund deadline to avoid excise tax (i.e., March 15) isn’t during the period of April 1 to July 14; however, because the refund deadline for a calendar-year EACA plan is June 30, the EACA deadline is extended to July 15.
Though many are hoping additional relief will be issued to cover the March 15 refunds, there’s no such relief yet.
5 Excess deferrals (IRC §402(g)/IRC §401(a)(30) limit)
The deadline to refund deferrals that exceed the 402(g) limit is extended from April 15, 2020, to July 15, 2020. Plan sponsors can breathe a sigh of relief, since this overturns the IRS’ earlier position posted on its website.
6 Loan repayments (including any cure period)
The extended deadline of July 15 applies to loan repayments due during the period of April 1 to July 14.
This relief is available to all participants with an outstanding loan and is not restricted to qualified individuals who may suspend loan repayments under the CARES Act. Unlike the CARES Act provision, this relief does not extend any loan beyond the maximum statutory loan term (e.g., five years for non-residential loans). Further guidance from the IRS will be helpful to clarify how this relief will interact with the CARES Act provision.
7 Forms 5500, 5500-SF, 5500-EZ, related schedules, and Form 8955-SSA
The filing of these forms and related schedules is extended to July 15, 2020, if the deadline (or extended deadline) falls during the period of April 1 to July 14. Unfortunately, this stops short of providing relief for calendar-year plans, since filings without extension are due on July 31 (i.e., outside the period of April 1 to July 14).
Relief is provided, however, for off-calendar year plans. For example, a Form 5500 filing for a plan year that ended September 30, 2019, is due on April 30, 2020 (without extension). Since that deadline falls during the period of April 1 to July 14, the deadline is automatically extended to July 15, 2020 (even without filing a Form 5558).
If a Form 5558 is filed for a plan and the extended deadline falls during the period of April 1 to July 14, the extension to July 15, 2020, also applies. For example, a Form 5500 filing for a plan year that ended June 30, 2019, is due on January 31, 2020 (without extension); however, if a Form 5558 is filed prior to that due date, the extended deadline is April 15, 2020. Since April 15, 2020, falls during the period of April 1 to July 14, the deadline is automatically further extended to July 15, 2020.
8 EACA permissible withdrawals
The deadline for an employee to request a permissible withdrawal from an EACA plan is no later than 90 days after the employee’s first salary deferral. The deadline is extended to July 15, 2020, if the 90th day (or shorter period, if the plan provides) is during the period of April 1 to July 14.
Extending the deadline to receive EACA permissible withdrawals is another indication of the IRS’ support for EACAs. They showed their support most recently by providing a special EACA tax credit under the SECURE Act. Other advantages of EACAs include an extended ADP/ACP test refund period to avoid a 10% excise tax, liberal safe harbors for correcting missed salary deferrals, and exemption from 30-day advance notice of a qualified default investment alternative. Plan sponsors may want to consider the benefits of adding an EACA to their 401(k) plan.
9 Self-correction period under Employee Plans Compliance Resolution System (EPCRS)
The deadline for self-correcting significant operational failures is extended to July 15, 2020, if the deadline would otherwise expire during the period of April 1 to July 14.
This extension is limited, as it only affects plans with off-calendar plan years. Additionally, the extension does not appear to be available for other time-sensitive actions under the self-correction program under EPCRS, such as the required 45-day notice for safe harbor corrections of missed salary deferrals.
10 Deposit of IRA contributions, refund of excess IRA contributions, and/or recharacterization of IRA contributions
The deadline is extended to July 15, 2020.
Prior guidance (Notice 2020-18) extended the deposit deadline for IRA contributions to July 15. This extended deadline now also applies to the refund of excess IRA contributions (to avoid 6% excise tax) and/or recharacterization of IRA contributions.
Notice 2020-23 provides welcome relief—but we’re hoping for more
Although the extensions under IRS Notice 2020-23 are a good start, they’re not enough. That’s why we applaud the various government agencies that are working together to provide additional relief to help employers and their retirement plans endure this economic crisis.
Most recently, the U.S. Department of Labor provided extensions under EBSA Disaster Relief Notice 2020-01 (EBSA Notice), issued on April 28, 2020. The EBSA Notice extends the time for certain ERISA actions relating to retirement plans, provided the responsible parties “act in good faith and furnish the notice, disclosure, or document as soon as administratively practicable under the circumstances.” The EBSA Notice also provides other relaxed rules for those affected by the pandemic.
For more information on the extended deadlines and how your retirement plan may be impacted, please contact your ERISA attorney or plan consultant.
The content of this document is for general information only and is believed to be accurate and reliable as of the posting date, but may be subject to change. It is not intended to provide investment, tax, plan design, or legal advice (unless otherwise indicated). Please consult your own independent advisor as to any investment, tax, or legal statements made herein.
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