IRS

Washington Pulse: IRS Issues Final Life Expectancy Regulations

On November 12, 2020, the IRS published final regulations updating life expectancy tables that are used for required minimum distributions (RMDs) and for other purposes. These new tables reflect an increase in life expectancies since the last tables were issued nearly 20 years ago. Although the updated tables do not apply until distribution years beginning in 2022, financial professionals should learn how the new life expectancy figures may affect their clients and should assess how their administrative systems will accommodate the changes.

 

Background

Two years ago, President Trump issued Executive Order 13847, which (among other things) directed the IRS to examine the life expectancy tables and to “determine whether they should be updated to reflect current mortality data and whether such updates should be made annually or on another periodic basis.” On November 8, 2019, the IRS published proposed regulations in response to the executive order. The IRS received numerous comments, but the only substantial change made in creating the final regulations was pushing back the applicability date to the 2022 calendar year.

Internal Revenue Code Section (IRC Sec.) 401(a)(9) and associated RMD regulations require “employees” to begin distributing their accumulated retirement assets by their required beginning date. (In this article, we will use the term “employee” because that is the term found in the Internal Revenue Code. It includes qualified plan participants, IRA owners, and all those who must take RMDs (e.g., beneficiaries).) The RMD rules help ensure that employees start taking distributions, and they permit payments over their life expectancy to avoid outliving their retirement savings. The IRS life expectancy tables determine the distribution period over which defined contribution-type retirement plans must be paid. The regulations specifically apply to RMDs taken from

  • qualified trusts (such as a 401(k) trust);
  • individual retirement accounts and annuities described in IRC Secs. 408(a) and (b);
  • eligible deferred compensation plans under IRC Sec. 457; and
  • IRC Secs.403(a) and §403(b) annuity contracts, custodial accounts, and retirement income accounts.

The life expectancy tables determine the distribution period for RMDs. The final regulations revise the three life expectancy tables found in Treasury Regulation (Treas. Reg.) 1.401(a)(9)-9. The Uniform Lifetime Table is used to determine the distribution period for those employees who must take RMDs during their lifetime. This table begins at age 72, which is the age at which RMDs must first be calculated under the SECURE Act rules. The distribution periods listed are simply the joint life expectancy of the employee at a certain age and a beneficiary who is exactly 10 years younger. Years ago, the IRS simplified the RMD process by allowing all employees—regardless of their beneficiary’s actual age—to use the Uniform Lifetime Table.

The Joint and Last Survivor Table reflects the life expectancy of two individuals. The ages in the table range from 0 to 120 years, and it shows the likely number of years that at least one of the two individuals will live. Despite listing all combinations of ages up to 120, this table is used in the RMD context for one purpose: to determine the distribution period for an employee who has named the spouse as the sole designated beneficiary—when the spouse is more than 10 years younger than the employee. This allows the employee to calculate the RMD using a longer life expectancy than under the Uniform Lifetime Table, resulting in a smaller RMD.

The third life expectancy table, the Single Life Table, is required in several situations. Perhaps the most common use is for determining the distribution period that a beneficiary must use when an employee dies. For example, assume that an IRA owner dies this year at age 75 and has named his 70-year-old sister as the sole beneficiary. Next year, his sister will determine her distribution period using the Single Life Table. The life expectancy for a (now) 71-year-old is 16.3 years under the current table.

The tables are also used for “substantially equal periodic payments” under IRC Sec. 72(t)(2)(A)(iv). The Internal Revenue Code contains an exception to the 10 percent early distribution penalty tax for certain pre-59½ distributions. Payments must be properly structured using the life expectancy tables contained in the regulations—and they must continue for at least five years and until the recipient reaches age 59½. This payment stream permits access to retirement funds while also preventing excessive fund depletion. The details of setting up such equal periodic payments are found in Revenue Ruling 2002-62, which the IRS expects to update to reflect the changes in the final life expectancy regulations.

 

The Transition Rule

The one provision that will likely create the most activity—and questions—is the final regulation’s “transition rule.” The IRS states that this rule is “designed to recognize that the general population has longer life expectancies than the life expectancies set forth in the formerly applicable Treas. Reg. 1.401(a)(9)-9.” The transition rule allows a beneficiary who has already locked into a life expectancy for RMD payouts to use a “one-time reset” to take advantage of the longer life expectancies in the new tables. This situation occurs when the employee died before January 1, 2021, and the beneficiary was using the old life expectancy tables to determine the RMD. Starting in 2022, the beneficiary’s RMD is based on the new tables, using the age for which the life expectancy was originally determined. An example may help.

Example: Frank died at age 80 in 2018. Frank’s nonspouse beneficiary, Rose, was 75 in the year he died. In 2019, the distribution period that Rose must use is 12.7 (the single life expectancy of a 76-year-old). For her distribution in 2021, Rose reduces that figure to 10.7 years: one year for 2020 and one year for 2021. Normally, Rose would then reduce her distribution period by one more year for 2022, to 9.7. But the transition rule permits Rose to reset her distribution period based on the new tables. Rose still uses her age in the year following Frank’s death, but she simply replaces the old life expectancy, 12.7, with the new one, which is 14.1. She then reduces that figure one year for each subsequent distribution year (2020, 2021, and 2022) to arrive at 11.1 instead of 9.7 (under the old tables).

Although this transition rule makes only incremental decreases in the amount that beneficiaries must distribute, this reset provides some relief for those who wish to distribute the smallest amount required in order to preserve assets. On the other hand, redetermining the distribution periods for beneficiaries who had commenced required distributions before 2022 will entail additional effort by financial organizations, plan administrators, and other advisers.

Note: The proposed regulations seemed to limit the circumstances under which a beneficiary could use the one-time reset. This apparent limitation was likely unintentional. But the final regulations revised the transition rule wording enough to verify a more expansive interpretation of the rule. So irrespective of how a beneficiary came to use the old Single Life Table, the new table can now be used. For those required to use “nonrecalculation” (by reducing the life expectancy by one year for each successive distribution year), the starting age remains the same. Spouse beneficiaries, who may use the “recalculation” method, simply start using the new tables in 2022.

 

Key Takeaways

The final regulations are nearly identical to the proposed regulations. While these new regulations are straightforward, there are still some important points to remember.

  • The new tables apply for distribution calendar years beginning on or after January 1, 2022.
  • The transition rule allows certain beneficiaries a one-time reset to use the longer life expectancies.
  • The IRS expects to review these tables every 10 years (or when new mortality studies are published).
  • The final regulations will require a significant number of individual RMD payout redeterminations.
  • Software platform providers and others may face sizeable programming tasks.

 

Looking Ahead

Fortunately, the IRS heeded commenters’ requests and delayed the final regulations’ applicability date to 2022. This will allow more time for all affected parties to integrate the new tables into their processes. The IRS will also release guidance regarding SECURE Act provisions, such as the rule that replaces certain beneficiary life expectancy payments with a requirement to deplete beneficiary accounts after 10 years. As guidance is released, rely on Ascensus to monitor developments and to publish helpful analysis.

 

 

Click here for a printable version of this issue of the Washington Pulse.


IRS Clarifies Extended Due Date for Single-Employer DB Plan Contributions

The IRS clarified today in IRS Notice 2020-82 that contributions to single-employer defined benefit plans due January 1, 2021, under the Coronavirus Aid, Relief, and Economic Security (CARES) Act are considered timely if they are made no later than Monday, January 4, 2021.

The CARES Act delayed both the annual and quarterly minimum funding contributions for single-employer defined benefit plans to January 1, 2021. While plan sponsors appreciated this delay, this raised a concern, as January 1, 2021, is a federal holiday falling on a Friday. While tax deadlines falling on a federal holiday generally are considered performed timely if they are performed on the next day that isn’t a Saturday, Sunday, or legal holiday, it was unclear if this extension to January 1, 2021, would be considered performed timely if completed on January 4, 2021.

 


Federal Agencies Jointly Issue Final Rule on Transparency In Healthcare Coverage

In response to President Trump’s Executive Order, Improving Price and Quality Transparency in American Healthcare to Put Patients First, the IRS, Department of Labor, and Department of Health and Human Services have jointly issued a Transparency In Coverage final rule. This guidance is intended to make healthcare price information accessible to consumers and other stakeholders to permit comparison-shopping.

The final rule requires that most healthcare plans make available to participants, beneficiaries, and enrollees (or their authorized representative) personalized out-of-pocket cost information, and the underlying negotiated rates for all covered healthcare items and services, including prescription drugs, through an Internet-based, self-service tool and in paper form upon request.

The guidance also requires most healthcare plans to make available to the public, including stakeholders such as consumers, researchers, employers, and third-party developers, three separate machine-readable files that include detailed pricing information. The detailed pricing information is to include 1) negotiated rates for all covered items and services between the plan or issuer and in-network providers; 2) historical payments to, and billed charges from, out-of-network providers; and 3) in-network negotiated rates and historical net prices for all covered prescription drugs by plan or issuer at the pharmacy location level.


IRS Announces 2021 Inflation-Adjusted Amounts for Welfare Benefits

On October 26, 2020, the IRS published Revenue Procedure (Rev. Proc.) 2020-45, which provides the 2021 inflation-adjusted amounts for various provisions of the Internal Revenue Code (IRC), including employer-provided welfare benefits. Specifically, Rev. Proc. 2020-45 provides inflation adjusted limitations that apply to voluntary employee salary reductions under an IRC Section (Sec.) 125 cafeteria plan, fringe benefit exclusion amounts under an IRC Sec. 132(f) qualified transportation fringe benefit, and total amount of payments and reimbursements under an IRC Sec. 9831(d) qualified small employer health reimbursement arrangement (QSEHRA). Details are described below.

 

Cafeteria Plan

For taxable years beginning in 2021, the dollar limitation under IRC Sec. 125(i) on voluntary employee salary reductions for contributions to health flexible spending arrangements is $2,750. If the cafeteria plan permits the carryover of unused amounts, the maximum carryover amount is $550.

 

Qualified Transportation Fringe Benefit

For taxable years beginning in 2021, the monthly limitation under IRC Sec. 132(f)(2)(A) for the aggregate fringe benefit exclusion for transportation in a commuter highway vehicle and any transit pass is $270. The monthly limitation under IRC Sec. 132(f)(2)(B) for the fringe benefit exclusion amount for a qualified parking benefit is $270.

 

QSEHRA

For taxable years beginning in 2021, to qualify as a QSEHRA under IRC Sec. 9831(d), the arrangement must provide that the total amount of payments and reimbursements for any year cannot exceed $5,300 ($10,700 for family coverage).

 

For additional information on the 2021 inflation-adjusted limits, see Rev. Proc. 2020-45.


IRS Issues Final Regulations on Default Withholding Rate for Periodic Retirement Plan Distributions

The IRS has issued a pre-publication version of final regulations on the default tax withholding rate to be applied to periodic and annuitized distributions from retirement plans. These final regulations are a response to Internal Revenue Code changes contained in the Tax Cuts and Jobs Act (TCJA), legislation enacted in 2017, and provide guidance for 2021 and future calendar years.

Prior to the change, in the absence of a withholding election, the amount to be withheld on a periodic payment was determined by treating the taxpayer as a married individual who had claimed three withholding exemptions. TCJA amended this provision to eliminate this fixed formula, providing flexibility such that—in the absence of a withholding election—the rate of withholding on periodic payments (the default rate) would instead be determined under rules prescribed by the Secretary of the Treasury.

Comments received after these regulations were issued in proposed form included the suggestion that a 10 percent flat rate of withholding apply rather than the default married-with-three-exemptions formula, but that any change to current rules not apply before 2022.

These final regulations align with TCJA in specifying that rules and accompanying procedures for future years’ periodic distributions will be communicated in applicable IRS forms, instructions, publications, or other guidance. However, they also note that—for 2021—the rate for withholding on period distributions when no election is made will remain unchanged. That is, the rate for 2021 will be applied as if the recipient is married and has claimed three exemptions.


IRS Announces Deadline Relief for Alabama Victims of Hurricane Sally

The IRS has announced in News Release AL-2020-02 an extension of deadlines for completing certain time-sensitive tax-related acts for Alabama victims of Hurricane Sally. In addition to extending certain tax filing and tax payment deadlines, the relief also includes completion of many acts under Treasury Regulation 301.7508A-1(c)(1), such as completion of rollovers, making loan payments, filing Form 5500, etc.

Affected taxpayers with a covered deadline that is on, or after, September 14, 2020, and on, or before January 15, 2021, will have until January 15, 2021, to complete the act. Affected taxpayers automatically include those who reside, or have a business located, within the designated disaster area, which at this time includes Baldwin, Escambia, and Mobile counties. Affected taxpayers who reside or have a business outside the covered disaster area may contact the IRS at 866-562-5227 to request this relief.


Washington Pulse: IRS Provides Additional SECURE Act Guidance

At the end of 2019, the President signed the most comprehensive retirement reform package in over a decade: the Setting Every Community Up for Retirement Enhancement (SECURE) Act. The SECURE Act is one of multiple bills that were included in the Further Consolidated Appropriations Act, 2020 (FCAA).

The SECURE Act’s primary goals include expanding retirement savings, simplifying existing rules, and preserving retirement income. As with any major legislation, the SECURE Act created numerous outstanding questions. And while the IRS has previously provided some answers, no SECURE Act guidance has been as detailed as the recently released IRS Notice 2020-68. In addition to providing guidance on the SECURE Act, this Notice provides guidance on the Bipartisan American Miners Act, which is also part of FCAA.

 

SECURE Act Guidance

Qualified charitable distributions and the repeal of the Traditional IRA contribution age limit

Effective for 2020 and later taxable years, taxpayers with eligible compensation can make Traditional IRA contributions at any age, not just for years before reaching age 70½. Notice 2020-68 states that financial organizations that accept such contributions must amend their Traditional IRA plan agreements and disclosure statements and provide the amended documents to IRA owners.

Although most financial organizations  are likely to adopt the relaxed eligibility requirements, Notice 2020-68 states that they are not required to accept such contributions. Keeping the old contribution limitation—or delaying implementing the new rule—may benefit organizations who face possible programming concerns.

The Notice confirms that, because IRA contributions and required minimum distribution (RMDs) are reported as two separate transactions, IRA owners may not offset their RMD amount for a taxable year by the amount of contributions made for the same year. So while Traditional IRA owners may contribute past age 70½ (if they are otherwise eligible), they may also have to take an RMD for the same year.

In addition to allowing individuals to make contributions after age 70½, the SECURE Act made changes to qualified charitable distributions (QCDs). Beginning at age 70½, IRA owners and beneficiaries may donate—while satisfying their RMDs—up to $100,000 of IRA assets tax-free to a qualified charity.

The SECURE Act requires that IRA owners age 70½ and older who make deductible Traditional IRA contributions reduce the amount that they can exclude from income when taking a QCD. Notice 2020-68 confirms the formula that IRA owners should use to determine this amount.

Example: In 2020, Mike attains age 70½ and makes a $7,000 deductible contribution to his Traditional IRA. Mike also takes a $9,000 distribution payable directly to his church, which is a qualified charity. How much of the $9,000 QCD can Mike exclude from income?

Excludable QCD amount = A – (B – C)

A = the QCD amount for a year before any reduction

B = the aggregate deductible contributions made for all tax years beginning with Mike’s 70½ year

C = prior year income exclusion reductions made as a result of the SECURE Act

Excludable QCD amount = $2,000, which is $9,000 – ($7,000 – $0)

NOTE: In future years, deductible contributions made after age 70½ will continue to lessen the amount by which QCDs will be excluded from income. Contributions that reduced the excludable QCD amount in previous years are ignored; contributions that have not reduced prior-year excludable QCD amounts are aggregated with current-year deductible contributions to determine what amount of the current QCD is included in income.

 Participation of long-term, part-time employees in 401(k) plans

Effective for 2021 and later plan years, employees who have three consecutive 12-month periods with at least 500 hours of service (and who satisfy the plan’s minimum age requirement) generally must be allowed to make elective deferrals in an employer’s 401(k) plan. The current, more restrictive, eligibility rules could continue to be applied to other contribution sources (such as matching contributions) and to ADP/ACP safe harbor plans. Employers may also exclude such part-time employees from coverage, nondiscrimination, and top-heavy test rules. The SECURE Act states that no 12-month period that begins before January 1, 2021, is considered when determining the three years of service for eligibility.

Notice 2020-68 confirms that an employer can apply the new eligibility rule to employer contributions that are subject to vesting requirements. But then for vesting purposes, the employer must generally consider each 12-month period for which the employee has at least 500 hours of service starting from the employee’s date of hire—including periods of service incurred before January 1, 2021. An employer may, however, continue to exclude periods of service described in Internal Revenue Code Section (IRC Sec.) 411(a)(4) (such as periods of service incurred before age 18 or before the plan was established).

It may be difficult for some employers to determine the correct periods of service for an employee who was previously excluded from the employer’s plan. As a result, the IRS is seeking comments on how to reduce possible administrative concerns related to counting years of vesting service beginning before January 1, 2021.

Small-employer automatic-enrollment tax credit

The SECURE Act created a new tax credit for small employers that include an eligible automatic contribution arrangement (EACA) feature in their new or existing qualified employer plan. A “qualified employer plan” includes a 401(a) plan, a 403(a) plan, a simplified employee pension (SEP) plan, and a savings incentive match plan for employees of small employers (SIMPLE) plan. To be eligible for the credit, employers must have had 100 or fewer employees who earned at least $5,000 in compensation during the previous calendar year. The maximum annual tax credit is $500 for each of the first three years that the employer includes an EACA in a qualified employer plan. This provision is effective for 2020 and later taxable years.

Notice 2020-68 clarifies that employers may receive a credit for each year during a single three-year period, starting in the first year that an employer adds an EACA. In addition, employers that maintain more than one qualified employer plan must offer an EACA in the same qualified employer plan for each year of the three-year period. For example, an employer that maintains two different 401(k) plans cannot receive a tax credit in 2021 if it adds an EACA to Plan A in 2020, amends to remove the EACA from Plan A in 2021, and then amends to add the EACA to Plan B in 2021.

Notice 2020-68 also clarifies that each eligible employer that participates in a multiple employer plan (MEP) may receive the tax credit. The three-year period begins with the first taxable year that an eligible employer includes an EACA under a MEP. An employer will continue to be eligible for the credit even if it spins off and establishes its own single-employer plan.

Qualified birth or adoption distributions (QBADs)

As of January 1, 2020, distributions taken within 12 months of the birth of a child or adoption of an “eligible adoptee” are exempt from the 10 percent early distribution penalty tax. An eligible adoptee is a child under the age of 18 or an individual who is physically or mentally incapable of self-support. An eligible adoptee does not include a child of the individual’s spouse. Each parent may distribute up to $5,000 in aggregate, per birth or adoption event, from an IRA, a 401(a) defined contribution plan, a 403(a) or 403(b) annuity plan or contract, or a governmental 457(b) plan.

Individuals may repay these amounts to an IRA or eligible retirement plan. While there is currently no stated deadline for repaying a QBAD, the Treasury Department plans to issue regulations under IRC Sec. 72(t) that will address recontribution rules, including rules related to the timing of recontributions.

Notice 2020-68 clarifies that individuals are “physically or mentally incapable of self-support” if they meet the disability definition found in IRC Sec. 72(m)(7). According to this definition, an individual is disabled if he “is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or to be of long-continued and indefinite duration.”

In addition, the Notice addresses several other matters.

  • Individuals may receive a QBAD for each birth and each adoption. For example, an individual who gives birth to twins may distribute $10,000 from her IRA and treat the entire amount as a QBAD.
  • A QBAD is not treated as an eligible rollover distribution for purposes of the direct rollover rules, the IRC Sec. 402(f) notice requirement, and the 20 percent mandatory withholding requirement.
  • A QBAD is an optional distributable event, so employers are not required to add the feature to their plans.
  • A plan administrator may rely on a reasonable representation that the individual is eligible for a QBAD, unless the administrator has actual knowledge to the contrary.
  • An eligible retirement plan must accept QBAD recontributions if 1) the retirement plan permits QBADs, 2) the individual received a QBAD from that plan, and 3) the individual is otherwise eligible to make a rollover contribution to that plan at the time he wishes to recontribute the QBAD to the plan.
  • A QBAD that is recontributed to an eligible retirement plan is deemed to be an eligible rollover distribution that meets the 60-day rollover rule.
  • A participant who receives an in-service distribution from a plan that does not offer QBADs may still claim that distribution as a QBAD on her income tax return and recontribute the amount to an IRA.

Difficulty-of-care compensation eligible for IRA contributions

Certain foster care providers receive payments that are not includable in taxable income and therefore were not considered to be compensation. As a result, such individuals may not have been able to contribute to a retirement plan. Now such after-tax “difficulty-of-care payments” will qualify as eligible compensation for IRAs and defined contribution plans. This provision is effective for IRA contributions made after December 20, 2019, and for contributions made to defined contribution plans in 2016 and later plans years.

Notice 2020-68 confirms that difficulty-of-care payments to an employee must be made by the employer in order to be treated as eligible compensation. Employers that make difficulty-of-care payments to their employees must amend their retirement plans to include difficulty-of-care payments in their plan’s definition of compensation. Notice 2020-68 also notes that the IRS will release future guidance to address whether the six percent penalty tax will apply to excess IRA contributions that are based on difficulty of care payments.

 

Bipartisan American Miners Act Guidance

Under IRC Sec. 401(a)(36), pension plans could allow in-service distributions at age 62. Effective for 2020 and later plan years, the Bipartisan American Miners Act allows in-service distributions at age 59½ to participants in governmental 457(b) plans and 401(a) pension plans.

Notice 2020-68 verifies that allowing participants to take in-service distributions starting at age 59½ does not solely affect the plan’s normal retirement age. A pension plan’s definition of normal retirement age must still meet the requirements of Treas. Reg. 1.401(a)-1(b)(2), which states that a plan’s normal retirement age may not be earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed. A normal retirement age that is age 62 or later is deemed to satisfy the reasonably representative requirement. Notice 2020-68 also states that employers may continue to rely on the proposed regulations that were issued in 2016 for governmental pension plans. Employers are not required to offer the age 59½ in-service distribution.

 

Amendment Guidance

To help synchronize amendment deadlines for the SECURE Act, the Bipartisan Miners Act, and the Coronavirus Aid, Relief, and Economic Security Act, Notice 2020-68 states that employers with qualified retirement plans and 403(b) plans that are not maintained by a public school will have until the last day of the first plan year beginning on or after January 1, 2022, to amend their plans for the SECURE Act and the Bipartisan American Miners Act. This is a change from the Bipartisan Miners Act, which gave employers until the end of their 2020 plan year to amend their plan documents. Those employers with qualified governmental plans under IRC Sec. 414(d), collectively bargained (union) plans, and 403(b) plans maintained by a public school have until the last day of the first plan year beginning on or after January 1, 2024.

Governmental 457(b) plan administrators must amend their documents for the SECURE Act and the Bipartisan American Miners Act by the later of the last day of the first plan year beginning on or after January 1, 2024, or if applicable, the first day of the first plan year beginning more than 180 days after the date of notification by the IRS that the plan was administered in a manner that is inconsistent with the requirements of IRC Sec. 457(b).

Notice 2020-68 provides long awaited IRA amendment guidance. The Notice states that financial organizations must amend their IRA plan agreements and disclosure statements for the SECURE Act by December 31, 2022, or a later date as prescribed by the Treasury Secretary. The IRS expects to issue revised model IRA documents and an updated Listing of Required Modifications (LRMs). The LRMs will contain sample language that document providers may use when updating their IRA prototype documents. Employers must amend their deemed IRA documents based on the deadline applicable to the retirement plan under which the deemed IRA is established.

 

Next Steps

If they haven’t already, employers and financial organizations should educate themselves and their staff on the new requirements and determine whether they will offer any of the optional provisions. They should also start considering the amendment process for their retirement plan and IRA documents.

The IRS is requesting comments on the topics covered in Notice 2020-68—especially on the provision relating to long-term, part-time employees. Comments must be submitted on or before November 2, 2020, and should refer to Notice 2020-68. The Treasury Department and IRS are still expected to provide further guidance—including new regulations—on the SECURE Act and Bipartisan American Miners Act.

Ascensus will continue to follow any new guidance as it is released. Visit ascensus.com for the latest developments.

 

 

Click here for a printable version of this issue of the Washington Pulse.


IRS Provides Welcome Deadline Relief for Savings Arrangement Reporting, Limited Additional Extensions

On May 28, 2020, the IRS issued limited additional relief that extends deadlines for certain time-sensitive actions related to tax-advantaged savings arrangements. Most awaited was an extension for providing information returns for IRAs, health savings accounts (HSAs), Archer medical savings accounts (MSAs), and Coverdell education savings accounts (ESAs). These information returns are Form 5498, IRA Contribution Information, Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information, and Form 5498- ESA, Coverdell ESA Contribution Information.

Deadlines for providing these information returns to the IRS and to account owners had previously been extended by IRS Notice 2020-23 through July 15, 2020, in response to the coronavirus (COVID-19) pandemic. The deadline for annual contributions to these accounts was also extended to July 15, 2020. This presented custodial organizations and service providers to these accounts with the dilemma of reporting contributions that could be received as late as the deadline for their reporting.

Notice 2020-35 now provides a six-week window after the July 15, 2020, contribution deadlines in which organizations can prepare and provide these information returns to the IRS and to account owners.

Other Deadlines Not Extended

Notice 2020-23 extended many other deadlines to July 15, 2020, including completing rollovers, making retirement plan loan payments, filing Form 5500, Annual Return, Report of Employee Benefit Plan, as well as numerous others. These deadlines are not extended by the latest guidance in Notice 2020-35.

Extensions Granted by Notice 2020-35

The following are among the limited number of deadlines extended by Notice 2020-35.

  • Providing Form 5498-series information returns for IRAs, ESAs, HSAs, and MSAs. (Providing these information returns after August, 31, 2020, will be subject to IRS penalty, which will be calculated from September 1, 2020, through the date the information returns are actually provided.)
  • Close of the 403(b) plan remedial amendment period remains at June 30, 2020, this guidance making official an earlier IRS website announcement.
  • Adoption by a defined benefit pension plan of a pre-approved plan document, filing a request for a determination letter under the second six-year cycle, or certain other actions with respect to disqualifying provisions have a deadline of July 31, 2020.

Notice 2020-35 also extends to July 15, 2020 (not August 31), several items not previously granted extensions. These include the following.

  • Application for a funding waiver by a defined benefit pension plan that is not a multi-employer (union) plan.
  • Filing IRS Form 5330, Return of Excise Taxes Related to Employee Benefit Plans, and paying these excise taxes.