Defined contribution plan

DOL Guidance to Aid Retirement Plans Facing Missing Participant Issues

The Department of Labor’s (DOL’s) Employee Benefits Security Administration (EBSA) has released a three-part guidance package to assist retirement plan fiduciaries in dealing with issues of missing or unresponsive participants. These issues typically involve terminated participants who have vested benefits remaining in an employer-sponsored plan, or terminating or abandoned plans. An EBSA news release accompanies the guidance package.

The guidance package consists of the following components.


Best Practices Guidance

The “Missing Participants – Best Practices for Pension Plans” element of the guidance describes steps that fiduciaries of retirement plans—including both defined benefit and defined contribution plans, such as 401(k) plans—can take to avoid incidents of missing or unresponsive participants, and to locate those with benefits due them that have not responded to efforts to locate them. This element also describes documentation that should be retained by retirement plans to show evidence of due diligence in meeting this fiduciary obligation.


Compliance Assistance Release 2021-01

The Compliance Assistance Release No. 2021-01—addressed to EBSA regional directors—describes the investigative and enforcement approach that the agency will take in assessing whether a defined benefit pension plan fiduciary has met its obligations to find and convey plan benefits that are due terminated participants. It is intended to guide the EBSA’s regional offices in facilitating voluntary compliance by retirement plan fiduciaries under the agency’s Terminated Vested Participants Project.


Field Assistance Bulletin (FAB) 2021-01

FAB 2021-01 describes the DOL’s temporary enforcement policy with respect to retirement plans’ use of a recently provided option that allows participant benefits in terminating or abandoned defined contribution plans to be transferred to the Pension Benefit Guaranty Corporation (PBGC) under its Defined Contribution Missing Participants Program.

There is currently a regulatory safe harbor for participant benefits in terminating or abandoned defined contribution plans to be transferred to IRAs, and—in limited circumstances—to be transferred to state unclaimed property funds. The EBSA envisions expanding this regulatory safe harbor to include the transfer of such benefits to the PBGC under its Defined Contribution Missing Participants Program.

Pending the expansion of this safe harbor, FAB 2021-1 states that it will not pursue violations against responsible plan fiduciaries of terminating defined contribution plans or qualified termination administrators (QTAs) of abandoned plans who transfer benefits to the PBGC in accordance with its missing participant regulations.

IRS Proposes Regulations for Automatic Deadline Postponements for Federally Declared Disasters

The IRS has released a pre-publication version of proposed regulations that would create an automatic 60-day postponement of deadlines for certain time-sensitive, tax-related acts in circumstances of federally-declared disasters.

The tax-related acts covered by this guidance are defined in Internal Revenue Code Section 7508A. This is the authority that historically has been cited for postponement of deadlines in cases of localized disaster declarations. Such localized relief is announced by the IRS in news release form, describing the area affected—generally on a county-by-county basis—and describing the length of the deadline postponements.

These individually designated postponements may have a duration of as much as 120 days. Some are less. The new proposed regulations would create an automatic 60-day postponement in cases of federally declared disasters, ensuring that there would be at least 60 days to complete the tax-related acts covered by the guidance. The proposed regulations also define what that term “federally-declared disaster” will mean for purposes of this 60-day period.

In addition to extending certain tax filing and tax payment deadlines, the postponements addressed in this guidance include completion of the many time-sensitive, tax-related acts described in IRS Revenue Procedure 2018-58 and Treasury Regulation 301.7508A-1(c)(1), which include filing Form 5500 for retirement plans, completing rollovers, making retirement plan loan payments, etc.

A period of 60 days for submitting comments on the guidance, or to request a public hearing, will begin upon publication in the Federal Register.

Paycheck Protection Program to Re-Open Next Week

The Department of Treasury and Small Business Administration have jointly announced the reopening of the Paycheck Protection Program the week of January 11. Community financial institutions will begin offering First Draw PPP Loans Monday, January 11, and Second Draw PPP Loans starting Wednesday, January 13. Loans will be available to all participating lenders soon after.

Included in the announcement is new guidance that seeks to remove barriers for minority, underserved, veteran, and women-owned business, as well as interim final rules on amendments to the PPP and terms of Second Draw PPP Loans. Those available for a Second Draw PPP Loan generally include borrowers that

  • previously received a first draw PPP loan and will or have used the full amount only for authorized uses;
  • have no more than 300 employees; and
  • can demonstrate at least a 25 percent reduction in gross receipts between comparable quarters in 2019 and 2020.

IRS Issues Deadline Relief for Mississippi Victims of Hurricane Zeta

The IRS has issued News Release MS-2021-01, announcing the postponement of certain tax-related deadlines for Mississippi victims of Hurricane Zeta, for hurricane-related events beginning October 28, 2020. In addition to extending certain tax filing and tax payment deadlines, the relief includes completion of many time-sensitive, tax-related acts described in IRS Revenue Procedure 2018-58 and Treasury Regulation 301.7508A-1(c)(1), which include filing Form 5500 for retirement plans, completing rollovers, making retirement plan loan payments, etc.

The area included in the relief at this time includes George, Greene, Hancock, Harrison, Jackson, and Stone counties. Taxpayers in other locations will automatically be added to the relief if the disaster area is further expanded.

Affected taxpayers with a covered deadline on or after October 28, 2020, and on or before March 1, 2021, will have until March 1, 2021, to complete the act(s). “Affected taxpayer” automatically includes anyone who resides or has a business located within the designated disaster area. Those who reside or have a business located outside the identified disaster area, but have been affected by the disaster, may contact the IRS at 866-562-5227 to request the relief.

Final Regulations Published on Independent Contractor Status

Final regulations, entitled Independent Contractor Status Under the Fair Labor Standards Act, issued by the Department of Labor’s Wage and Hour Division, are published in today’s Federal Register. They are described as being intended to clarify distinctions between “employee” and “independent contractor” status. The guidance was issued in proposed form in September 2020. Accompanying the final regulations is an agency news release.

IRS Revenue Ruling Addresses Tax Benefits Related to Paycheck Protection Program Loans

The IRS has issued Revenue Ruling (Rev. Rul.) 2021-02, guidance that addresses certain tax benefits associated with employer loans under the federal Paycheck Protection Program (PPP), an element of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

The PPP is a Small Business Administration lending program created by the CARES Act to help small employers meet payroll and other expenses, as businesses and the nation dealt with the economic effects of the coronavirus (COVID-19) pandemic. Payroll expenses can include employer contributions to defined contribution and defined benefit retirement plans, as well as providing group healthcare coverage, including payment of insurance premiums. If certain conditions are met, PPP loans can be forgiven and treated as a grant.

Rev. Rul. 2021-02 addresses questions related to other potential tax ramifications and/or benefits associated with expenses for which PPP loans are taken, including loans that are ultimately forgiven.

Rev. Rul. 2021-02 retroactively amends the CARES Act, as well as supersedes post-CARES Act guidance (Notice 2020-32 and Rev. Rul. 2020-27). In doing so, it provides that no amount will be included in the gross income of a PPP participant as a result of a PPP loan being forgiven. No tax deduction for such PPP-related expenses is to be denied, and no other tax benefit reduced, as a result of that exclusion from gross income.

Final Regulations Published on Offset Retirement Plan Loan Rollovers

Published in today’s Federal Register are IRS final regulations that implement a provision of the 2017 Tax Cuts and Jobs Act (TCJA) that provides an extended period—beyond the normal 60 days—to roll over amounts of certain retirement plan loans that are offset and treated as distributions. These final regulations were released in pre-publication form on December 8, 2020.

A qualified plan loan offset (QPLO) is a plan loan in good standing that is offset as a result of plan termination or a participant’s severance from employment. The amount of such an offset loan can be rolled over to an IRA or another employer-sponsored retirement plan as late as the participant’s tax return deadline, including extensions, for the tax year when the loan was offset.

A plan loan that is offset for other reasons, such as for a failure to meet required payments while still employed, is not a QPLO and does not qualify for the extended rollover period. The final regulations provide details and examples to help make such determinations.

While these final regulations are considered “effective” with today’s publication, they are only required to be applied to loans that are offset on or after January 1, 2021. As a result, required reporting of QPLOs on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., will first apply to 2021 information returns that are provided to participants and to the IRS in January 2022.

However, taxpayers and information return filers may optionally apply the guidance and report accordingly as of the August 20, 2020, date when the guidance was published in proposed form.

IRS Releases 2021 Tax Year IRA and Retirement Plan Reporting Forms 1099-R, 5498

The IRS has posted at its website the 2021 tax year version of Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., and Form 5498, IRA Contribution Information. As the title implies, Form 1099-R is filed by financial organizations and service providers to report to account owners and the IRS distributions from tax-qualified retirement savings arrangements. Form 5498 more narrowly reports IRA-related information—including contributions to IRAs, SEP and SIMPLE IRA employer plans, end-of-year fair market values, rollovers, conversions, recharacterizations, etc.

Despite Some Confusion, December 30, 2020, Remains the Deadline for Special Tax Benefits of CARES Act Retirement Plan Distributions

Today is the last day for eligible taxpayers to take IRA and employer-sponsored retirement plan distributions that qualify for special tax benefits under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This legislation was enacted in March 2020 as a response to the coronavirus (COVID-19) pandemic. There has been some industry and media confusion over whether more recent pandemic relief legislation has provided an extended opportunity to qualify for such benefits, but it has not.

The following retirement plan-related CARES Act provisions apply to eligible coronavirus-related distributions (CRDs).

  • Exemption of up to $100,000 of retirement plan withdrawals from the 10% penalty tax for early withdrawals from retirement plans.
  • Three-year ratable taxation of such withdrawals, with a period of three tax years to return such withdrawal to a qualifying retirement account.

Just after Christmas, President Trump signed into law the Consolidated Appropriations Act (CAA), 2021, which provided federal agency funding, limited additional coronavirus (COVID-19) pandemic relief, and limited disaster relief. Among its provisions was the granting of the above-described tax benefits to victims of certain regional natural disasters, if such disaster events began  during the period beginning December 28, 2019, and the declaration ended within 60 days after CAA’s date of enactment, December 27, 2020. For those eligible for this new benefit, retirement account withdrawals may be made for up to 180 days after CAA’s enactment.

In March 2020, President Trump had declared that all 50 states would be considered disaster zones as a result of the COVID-19 pandemic. This appears to be the source of the recent confusion, and what some have believed to be the eligibility of all Americans to make retirement account withdrawals that qualify as CRDs and eligibility for these above-described tax benefits.

However, the CAA provision that may have contributed to the confusion actually excludes disasters that are declared solely in response to the COVID-19 pandemic. Thus, President Trump’s COVID-19 disaster declaration of March 2020 covering the entire U.S. does not extend to all Americans the above-described tax benefits. (These individuals may, however, qualify for other benefits, such as extended deadlines for certain tax filings, and other tax-related transactions.)

DOL Final Regulations on Independent Contractor Status Have Been Received by OMB

Final regulations entitled Independent Contractor Status Under the Fair Labor Standards Act, issued by the Department of Labor’s Wage and Hour Division, have been received by the federal Office of Management and Budget (OMB). The OMB provides final review of regulatory guidance before its official release. Generally, only if found to be in need of revision, is such guidance returned to the originating agency for changes. Unless this proves to be the case, official release of these final regulations could be imminent.

These regulations, intended to clarify distinctions between employee and independent contractor status, were issued in proposed form in September 2020. Ascensus will review the final regulations when they are officially released. Visit for any new developments.