Legislative updates

Industry Welcomes Final Regulations for Default Electronic Delivery of Retirement Plan Disclosures

Scheduled for publication in the May 27th Federal Register are final regulations on default electronic delivery of retirement plan disclosures. These final regulations, issued by the Department of Labor’s Employee Benefits Security Administration (EBSA), provide an additional safe harbor that may enhance the ability of plan administrators and their service providers to deliver DOL-required disclosures to participants and beneficiaries of ERISA plans by electronic means.

An accompanying news release and EBSA fact sheet cite the presidential Executive Order of August, 2018, which directed the agency—in part—“to focus on reducing the costs and burdens that retirement plan disclosures impose on employers and others.” Proposed regulations were issued in October 2019, and public comments solicited at that time contributed to shaping these final regulations.

This guidance officially becomes effective 60 days following publication in the Federal Register. But the EBSA Fact Sheet notes that retirement plans may rely on these regulations immediately; no enforcement action will be taken against a plan for such premature reliance due to the impact of the coronavirus (COVID-19) pandemic. (The regulations’ preamble notes that the agency has chosen not to extend the guidance to welfare benefit plans at this time.)

Following are selected observations from an initial review of the final regulations and EBSA fact sheet.

The new safe harbor

The electronic delivery safe harbor can be satisfied by either of two means.

  • Website posting: A plan administrator is allowed to post covered documents (documents required to be furnished by ERISA Title 1 plans) on a website if appropriate notification of Internet availability is furnished to the electronic addresses of covered individuals.
  • Email delivery: A plan administrator may send covered documents directly to the electronic addresses of covered individuals, with the covered documents either in the body of the email or as an attachment to the email.

First step to e-delivery is on paper

As in the proposed regulations, a plan administrator intending to deliver some, or all, covered documents electronically must first notify participants—in a paper communication—of this intention.

Paper option remains

Not unexpected, recipients can opt out of receiving covered documents electronically and receive them in paper form, without charge. However, plan administrators need not (but may) offer recipients a “pick and choose” option to receive some documents in paper form and some electronically; the plan can require that an opt-out be “global;” (all or nothing). Conversely, a plan that uses electronic means to deliver some covered documents need not use electronic means for all.

Combining notices of Internet document postings

Certain notices of Internet postings can be combined in a single annual notice of Internet availability (NOIA), including the following.

  • Summary Plan Description (SPD)
  • Documents that must be provided annually; (e.g., Summary Annual Report (SAR))
  • Other documents authorized by the Secretary of Labor
  • Notices required by the Internal Revenue Code if authorized by the Secretary of the Treasury; (e.g., automatic contribution arrangement (ACA) notice)

Flexibility in definition of “website

The final regulations acknowledge the importance of including new and developing technologies in applying the guidance, as long as the safe harbor requirements can be met. Mobile applications qualify.

Informing participants of document posting

If covered documents are to be posted to a website, recipients must be able to receive a plan’s NOIA. An electronic address to which a NOIA is sent may be an email address. If it is a phone number, it must be capable of receiving written/text messages (plan administrators must confirm this). Delivery of a NOIA by voice message does not meet this requirement.

Availability of web-posted documents

A covered document posted to a plan’s website must remain there at least one year, or—if longer—until superseded (replaced by) an updated version of the same document.

Document description accompanying a NOIA
A NOIA alerting a participant to an Internet document posting need not include a separate description of the document, if the document’s name—included in the NOIA—would reasonably convey the nature of the document. If not (e.g., a blackout notice), a description of the document being posted to the Internet is required.

Readability

Detailed guidelines for readability in the proposed regulations (using the Flesch reading ease score) were removed, and are not included in the final regulations. The final regulations more simply require that communications under this guidance be “written in a manner calculated to be understood by the average plan participant.”

Accessing and Understanding

The plan administrator has no affirmative obligation under the final regulations to monitor whether covered individuals have visited a website to view posted information. Unaddressed—but noted, in reference to a recent ERISA court case—is the issue of whether a recipient has read, understood, and has “actual knowledge” of the information posted.

Special rule for severance from employment from plan sponsor

Procedures should be in place to ensure that a plan administrator will continue to have a valid electronic address to which notices can be provided after severance from employment.

Transition relief, prior guidance superseded

For an 18-month period following the effective date of these final regulations, retirement plans can also rely on prior guidance for the delivery of certain covered disclosures. This guidance includes Field Assistance Bulletin (FAB) 2006-003, FAB 2008-003 (Q&A 7), and Technical Release 2011-03R. Thereafter, the relevant portions of the prior guidance are superseded by the final regulations.

Reasonable procedures for compliance

These final regulations add “technical maintenance” of websites as a circumstance that warrants consideration of facts and circumstances, when—for a reasonable amount of time—disclosure documents may be unavailable to a recipient.

We’re currently preparing a Washington Pulse article to provide further analysis of the final e-delivery regulations, and it will be posted to the the ascensus.com newsroom once available.

 


House Passes More Pandemic Aid; Quick Senate Action Not Expected

The House of Representatives late Friday passed H.R. 6800, the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, providing additional aid to many who are adversely affected by the novel coronavirus (COVID-19) pandemic. The bill also contained non-COVID-19-related provisions considered likely to prove controversial in the Senate.

Unlike the Families First Coronavirus Response Act, and the Coronavirus Aid, Relief, and Economic Security (CARES) Act—both of which moved fairly rapidly through Congress—the HEROES Act has been called “dead on arrival” by Senate Majority Leader Mitch McConnell (R-KY), who—with Republican colleagues—envisions a much less comprehensive bill. Sen. McConnell has also expressed a desire to move slowly and gauge the effectiveness of earlier relief. Most expect no additional COVID-19-related legislation to be enacted before sometime in June.

As announced last week, the House bill contains provisions for the following.

  • Continued financial assistance to unemployed workers
  • Financial assistance to state, local, tribal, and territorial government entities
  • Waiver of 2019 required minimum distributions (RMDs)
  • Waiver of the 60-day and one-rollover-per-12-month rules for otherwise-required RMDs waived for 2019 and 2020
  • Amendments to the Emergency Family and Medical Leave Expansion Act
  • Relief for participants in health flexible spending arrangements (FSAs)
  • Codifying the ability of employers to deduct certain expenses covered by loans that are forgiven under the SBA Paycheck Protection Program
  • Providing money purchase pension plans the early distribution and loan relief that the CARES Act provided to other qualified retirement plans
  • A new retirement “composite plan,” with features that include those of 401(k) and defined benefit (DB) pension plan
  • Relief for multiemployer (collectively-bargained) DB pension plans
  • Amortization relief for single employer DB pension plans
  • Further funding relief (beyond that provided by the SECURE Act) to certain community newspaper DB plans
  • Aid to certain federal agencies affected by the pandemic, including the Departments of Homeland Security, Interior, Health and Human Services, Labor, Transportation, Housing and Urban Development, and Education
  • Enhanced Medicare and Medicaid benefits
  • Medical supply chain enhancement
  • Testing and reporting enhancement
  • National strategic stockpile for pandemic response
  • Bankruptcy protections for homeowners
  • Certain student loan relief and protections
  • Additional aid to veterans during the COVID-19 pandemic
  • Federal election early and by-mail voting procedure

House Democrats Introduce Next Coronavirus Relief Bill

In an atmosphere more partisan than earlier coronavirus relief efforts, the Democratic caucus of the House of Representatives has released a bill to fund another round of assistance as the nation attempts to cope with the health and economic effects of the coronavirus (COVID-19) pandemic. This legislation, as yet unnumbered, is being referred to as the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act.

Three prior bills—which provided direct cash benefits to Americans, created a small business lending program to help employers retain employees and provided enhanced access to tax-favored retirement savings—were dealt with quickly by Congress and signed into law by President Trump. This round of relief has been predicted to provoke greater resistance among lawmakers who are averse to expanding the federal deficit. There is also expected to be less common ground in the House and Senate—and Democrat and Republican—priorities for additional relief.

The House-released bill contains provisions for the following.

  • Continued financial assistance to unemployed workers
  • Financial assistance to state, local, tribal, and territorial government entities
  • Waiver of 2019 required minimum distributions (RMDs)
  • Waiver of the 60-day and one-rollover-per-12-month rules for otherwise-required RMDs waived for 2019 and 2020
  • Amendments to the Emergency Family and Medical Leave Expansion Act
  • Relief for participants in health flexible spending arrangements (FSAs)
  • Codifying the ability of employers to deduct certain expenses covered by loans that are forgiven under the SBA Paycheck Protection Program
  • Providing money purchase pension plans the early distribution and loan relief that the CARES Act provided to other qualified retirement plans
  • A new retirement “composite plan,” with features that include those of 401(k) and defined benefit (DB) pension plan
  • Relief for multi-employer (collectively-bargained) DB pension plans
  • Amortization relief for single employer DB pension plans
  • Further funding relief (beyond that provided by the SECURE Act) to certain community newspaper DB plans
  • Aid to certain federal agencies affected by the pandemic, including the Departments of Homeland Security, Interior, Health and Human Services, Labor, Transportation, Housing and Urban Development, and Education
  • Enhanced Medicare and Medicaid benefits
  • Medical supply chain enhancement
  • Testing and reporting enhancement
  • National strategic stockpile for pandemic response
  • Bankruptcy protections for homeowners
  • Certain student loan relief and protections
  • Additional aid to veterans during the COVID-19 pandemic
  • Federal election early and by-mail voting procedure

Retirement Spotlight: Legislative Support for Small Businesses During Coronavirus Pandemic

Many U.S. businesses—large and small—are experiencing uncertainty and varying levels of hardship as they try to stay afloat during the coronavirus (COVID-19) pandemic. Hit particularly hard are small businesses and their workforce, which according to the Small Business Administration (SBA) encompasses 99.9 percent of U.S. businesses and represents nearly half of the U.S. private sector workforce. What lies ahead for the economy during 2020, and maybe even 2021, is surely unknown as these are unprecedented times. In the meantime, the federal government is deeply involved in helping to stabilize the economy until it can be opened up fully again.

Four bills have so far been enacted to help U.S. businesses and workers survive this time of turmoil, and more are expected. The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020, and authorizes the SBA to administer the Paycheck Protection Program (PPP). The PPP provides federally guaranteed, low-interest loans to businesses with 500 or fewer employees, and it includes the potential for loan forgiveness. The program’s key purpose is to keep employees on business payrolls during this unprecedented economic downturn. Specifically, the PPP loans help employers meet payroll (and certain other operating) costs during the eight weeks after the loan is disbursed. Among other things, approved payroll costs include wages (and withheld taxes), leave payments, and employee benefits such as retirement benefits and group healthcare coverage.

 

Second PPP Legislative Action

In the first PPP bill, the CARES Act provided approximately $350 billion in small-business loans. The program was so popular that the funds were depleted by mid-April. Subsequently, on April 24, the Paycheck Protection Program and Health Care Enhancement Act (H.R. 266) was signed into law, adding another $320 billion to the program, which includes $60 billion earmarked specifically for PPP loans to be administered through small, medium, and local financial institutions, like credit unions and community banks. The intent was to provide access to PPP loans to traditionally underserved businesses.

 

General Terms of the Loan

The PPP is administered by the SBA, but loans are obtained through financial organizations. Businesses with no more than 500 employees—including not-for-profits, sole proprietors, and independent contractors—can apply for the PPP loans through approved lenders. If the employer follows certain requirements, the loan will be forgiven and considered tax-free.

No collateral or personal guarantees are required, and neither the government nor lenders will charge small businesses any fees. PPP loans that are not forgiven must be repaid within two years at a one percent interest rate, but any loan repayments will be deferred for six months. Loan forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. The amount of the loan forgiven will be reduced if full-time headcount declines or if salaries and wages decrease.

Specific details of the program and information on how to apply can be found at the SBA website. Small-business owners may find it helpful to confirm whether the financial organizations they currently do business with are participating in the program.

 

PPP Loan Payroll Costs Include Retirement and Health Coverage

In an interim final rule and FAQs issued in April, the SBA confirmed that eligible payroll costs include a number of employee benefits, including among other things, employer contributions to defined contribution or defined benefit retirement plans,  group healthcare coverage (including payment of premiums), and certain parental, family, sick, and medical leave (with some exceptions if certain tax credits are claimed). Employees that are furloughed but remain on the payroll could presumably continue their salary deferrals to retirement accounts as well as their portion of health coverage and contributions to health savings accounts (HSAs), at their option. Employers may also continue their retirement contributions to these accounts if such contributions would be considered qualifying payroll expenses for the eight-week period.

 

Loan Forgiveness

Perhaps the key feature of the program is loan forgiveness. If program rules are followed, the PPP provides for forgiveness of the loan—up to the full principal amount plus accrued interest. Loans will generally be forgiven if employees are kept on the payroll for eight weeks following the loan date and if the loan assets are used for payroll, rent, mortgage interest, or utilities. The amount spent on payroll costs will determine how much of the loan can be forgiven; no more than 25 percent of the forgiven loan amount can be for non-payroll costs.

In addition to retirement contributions and healthcare and certain leave benefits, payroll costs also include the following.

  • Salary, wages, commissions, and tips up to $100,000 of annualized pay per employee
  • Allowance for dismissal or separation
  • Payment for vacation, parental, family, medical, or sick leave
  • State taxes and local taxes withheld from the employee’s compensation
  • Payments of compensation or income to a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment not more than $100,000
  • Excluded are qualified sick leave and qualified family leave for which credit is claimed under the Families First Coronavirus Response Act (FFCRA); compensation paid to an employee whose principal residence is outside the United States; and the employer portion of payroll taxes (FICA), Railroad Retirement Tax (RRTA), and federal employment taxes

The $100,000 per-employee limit on annual payroll expense does not apply to non-cash benefits such as employer contributions to qualified retirement plans, health benefits, and taxes withheld from employees’ pay. The borrower may also use up to 25 percent of the funds for mortgage interest, rent payments, or utility payments if the indebtedness or service started before February 15, 2020.

 

Strong Cautions for Employers: Consult Your Tax or Legal Adviser and Your Lender

The employer is required to document and certify to the lender that the loan funds were used to retain workers and to maintain payroll or make mortgage interest, lease, and utility payments for the eight-week period following the loan in order to qualify for loan forgiveness. The SBA has also indicated it will release additional guidance regarding loan forgiveness. Because these loans may be used cover a variety of expenses, employers should work with their tax or legal advisors and the PPP lender in determining how to qualify for loan forgiveness.

 

Click here for a printable version of this issue of the Retirement Spotlight.


President Trump Signs Bill to Replenish Paycheck Protection Program

Following passage by an overwhelming margin in the U.S. House of Representatives Thursday, President Trump today signed into law the Paycheck Protection and Healthcare Enhancement Act, infusing $320 billion in additional funding into the Small Business Administration’s Paycheck Protection Program (PPP).

PPP is a lending program created to help small employers retain employees on their payrolls during the coronavirus (COVID-19) pandemic and resulting economic emergency. In addition to providing additional funding for the small business loan program, the legislation also provides new funding for hospitals dealing with the immediate effects of the pandemic, and—specifically—for enhanced COVID-19 testing.

PPP loans, which, under certain conditions, may be forgiven, can be used not only for employee wages and salaries, but also to fund employee retirement and health benefits.

 


New Bill Would Triple Retirement Plan Contribution Limits for 2020

Rep. Patrick McHenry (R-NC) has introduced the Securing Additional Value for Every Retirement Saver (SAVERS) Act, legislation that would permit increased annual contributions to tax-qualified retirement savings arrangements for 2020.

The legislation would raise the following annual contribution limitations to 300 percent of previously-announced limits for 2020 (not to exceed applicable compensation).

  • Aggregate elective deferrals of an individual who participates in one or more 401(k), 403(b), governmental 457(b), or SIMPLE IRA plan, including catch-up deferrals
  • SIMPLE IRA-specific elective deferral limitations, including catch-up deferrals
  • Retirement plan annual additions (Internal Revenue Code Section 415) made on behalf of an individual under all plans of an employer
  • IRA contributions (does not appear to apply to catch-up contributions of those age 50 or older)

At a taxpayer’s option, 2019 compensation—or compensation for a tax year beginning in 2019—could be substituted for 2020 compensation.

The legislation has been referred to the House Committee on Ways and Means.


Bill to Replenish Paycheck Protection Program Passed by House, President Expected to Sign

Following passage by the U.S. Senate on Tuesday, the House of Representatives today overwhelmingly passed the Paycheck Protection and Healthcare Enhancement Act by a vote of 388 to 5, infusing a reported $320 billion in additional funding into the Small Business Administration’s Paycheck Protection Program (PPP). President Trump has indicated that he will sign the legislation into law.

PPP is a lending program created to help small employers retain employees on their payrolls during the coronavirus (COVID-19) pandemic and resulting economic emergency. In addition to providing additional funding for the small business loan program, the legislation also provides new funding for hospitals dealing with the immediate effects of the pandemic, and—specifically—for enhanced COVID-19 testing.

PPP loans, which, under certain conditions, may be forgiven, can be used not only for employee wages and salaries, but also to fund employee retirement and health benefits.

 


Bill Passed by Senate Would Replenish Paycheck Protection Program

The U.S. Senate on Tuesday overwhelmingly passed the Paycheck Protection and Healthcare Enhancement Act, legislation that would provide $320 billion in additional funding to the Small Business Administration’s Paycheck Protection Program (PPP). This lending program is intended to help small employers retain employees on their payrolls during the coronavirus (COVID-19) pandemic and resulting economic emergency. The legislation would also provide funding for hospitals dealing with the immediate effects of the pandemic, and, specifically, for enhanced COVID-19 testing.

PPP loans, which, under certain conditions, may be forgiven, can be used not only for employee wages and salaries, but also to fund employee retirement and health benefits during an eight-week period.

The legislation must now be passed by the U.S. House of Representatives. An attempt to do so is expected on Thursday, April 23. President Trump has indicated he would sign the Senate’s version of the bill.


Washington Pulse: New Coronavirus Law Provides Retirement Plan and Healthcare Relief

With virtually every part of the U.S. economy facing unexpected financial challenges from the coronavirus (COVID-19) pandemic, Congress has passed the largest relief package in U.S. history. Signed into law on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act is designed to assist the millions of Americans affected by the outbreak. The legislation has multiple provisions that affect retirement and health savings arrangements.

 

Retirement Savings Provisions

Most financial experts advise against using assets that have been set aside for retirement. But many individuals may have to do just that in order to supplement their income. The following provisions are intended to help individuals access their IRA and retirement plan assets and to replenish those assets later on.

  • New coronavirus-related distributions (CRDs). Individuals may withdraw up to $100,000 in aggregate from eligible retirement plans without paying the 10 percent early distribution penalty tax.
    • A CRD is defined as a distribution made on or after January 1, 2020, and before December 31, 2020, to a qualified individual, defined as
      • an individual (or the spouse or dependent of the individual) who is diagnosed with the COVID-19 disease or the SARS-CoV-2 virus in an approved test; or
      • an individual who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reduced hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Treasury Secretary.

The CARES Act clarifies that employers may rely on participants’ certification that they meet the CRD requirements.

    • An eligible retirement plan is defined as a qualified retirement plan (e.g., a 401(k) plan), 403(b) plan, governmental 457(b) plan, or an IRA.
    • CRDs will meet the retirement plan distribution requirements, as long as all distributions from one employer do not exceed $100,000.
    • Individuals may repay CRDs over three years beginning with the day following the day a CRD is made. Repayments may be made to an eligible retirement plan or IRA.
    • CRD repayments made within the three-year period will be treated as having satisfied the general 60-day rollover requirement.
    • CRDs will be taxed ratably over a three-year period, unless an individual elects otherwise.
    • Although CRDs may be rolled over, they are not considered “eligible rollover distributions” for certain purposes. Employers are not required to offer a direct rollover option. Employers are also not required to withhold 20 percent on a CRD or provide a 402(f) notice, which explains the tax and rollover options required by IRC Sec. 402(f).
  • Waiver of RMDs in—or for—2020. Financial markets have taken a hit in the wake of the coronavirus outbreak. To help savers retain more in their retirement accounts, the CARES Act waives the required minimum distribution (RMD) in 2020 for plan participants, IRA owners, and beneficiaries.
    • RMDs normally required to be taken for 2020 are waived.
    • This waiver also applies to individuals who turned 70½ in 2019 but who did not take their first RMD before January 1, 2020. In the absence of additional relief, the next RMD for those individuals must be taken by December 31, 2021.
    • For purposes of counting the five-year period for beneficiary distributions, 2020 is disregarded and one year is added to the remaining period. For example, for deaths occurring in 2019, the five-year period in which the inherited assets must be distributed will end on December 31, 2025, instead of on December 31, 2024.
    • A distribution that is taken in 2020—but that is not an RMD because of the waiver—may be rolled over to another eligible retirement plan or to an IRA within 60 days of the distribution. Though such distributions may be rolled over, they are similar to CRDs in that they are not treated by employer plans as eligible rollover distributions for purposes of the 20 percent mandatory withholding, the 402(f) notice, or the direct rollover requirements.
  • Increased maximum plan loan amount. The retirement plan loan maximum for a qualified Individual (defined as meeting the COVID-19 or SARs-CoV-2 conditions described previously) is increased to the lesser of $100,000 or 100 percent of the participant’s vested balance. This increased amount applies to loans made during the 180-day period beginning on March 27, 2020.
  • Delayed plan loan repayment date. Retirement plan loan repayment dates that occur between March 27, 2020, and December 31, 2020, can be delayed for one year, with the amortization period—including the five-year repayment deadline—adjusted accordingly.
  • Funding relief for defined benefit plans. For single-employer defined-benefit pension plans, the minimum required contributions due during 2020 can be delayed to January 1, 2021 (adjusted for interim earnings). Employers also have an option to use an alternative funding target percentage.
  • Expanded DOL authority to postpone certain deadlines. In addition to taking action in response to a disaster or terroristic threat, the DOL may now postpone certain deadlines under ERISA if a public health emergency (like the COVID-19 pandemic) occurs.
  • Amendment guidance. Plan sponsors generally must amend their retirement plans for these provisions by the last day of the 2022 plan year (government plans have an additional two years), or such other date as the Treasury Secretary may prescribe, with operational compliance during the interim period.

 

Health-Related Provisions

  • Allowable Services. Health insurance plans can pay for telehealth and remote care services without first requiring an individual to satisfy a deductible. Such payments will be deemed not to violate existing HSA requirements. This relief applies to plan years that begin on or before December 31, 2021, and promotes diagnosis and treatment while helping individuals avoid possibly risky in-person contact.
  • New qualified medical expenses. Certain medicines or products do not need to be a “prescription” to be qualified medical expenses for HSA, HRA, MSA, and health FSA purposes. The CARES Act specifically includes over-the-counter menstrual care products.

Although the CARES Act represents the largest relief package in U.S. history, there may be more to come. Government officials have stated that more relief will be available if needed. For now, the CARES Act should help many Americans get some of the financial relief that they desperately need. We are closely reviewing the CARES Act and other possible COVID-19 guidance. Visit ascensus.com for the latest information and developments.

 

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


House Passes Senate’s Coronavirus Response Bill Unchanged, President Trump Signs Into Law

The House of Representatives today passed—by an expedited procedure—the Coronavirus Aid, Relief and Economic Security (CARES) Act, which was passed by the Senate late on Wednesday, March 25. This afternoon, President Trump signed the legislation into law.

The CARES Act has many elements intended to aid businesses and workers, and to assist the U.S. healthcare system in dealing with the coronavirus (COVID-19) pandemic. As noted in a prior announcement, it also contains the following key provisions that would affect retirement savings arrangements, health savings accounts (HSAs), Archer medical savings accounts (MSAs), health reimbursement arrangements (HRAs), and health flexible spending arrangements (FSAs).

 

Retirement Savings Provisions

  • (As originally drafted, this legislation extended the income tax return filing deadline from April 15, 2020, to July 15, 2020. Prior to its enactment, however, the Treasury Department issued guidance extending the deadline and clarified other acts that are extended—including the ability to make IRA, HSA, and certain employer plan contributions—to July 15 for tax year 2019.)
  • Up to $100,000 in coronavirus-related distributions (CRDs) can be withdrawn by an individual from eligible retirement plans. These distributions will be exempt from the 10 percent early distribution penalty tax.
    • A CRD is defined as any distribution made on or after January 1, 2020, and before December 31, 2020, to a qualified individual, defined as
      • an individual (or the spouse or a dependent of that individual) who is diagnosed with COVID-19 or SARS-CoV-2 in an approved test; or
      • an individual who suffers related adverse financial consequences, or suffers from other factors as determined by the Secretary of the Treasury.

Plan administrators can rely on plan participants’ certification that they meet these requirements.

    • An eligible retirement plan is defined as a qualified retirement plan (e.g., a 401(k) plan), 403(a) plan, 403(b) plan, governmental 457(b) plan, or an IRA.
    • CRDs will be treated as meeting retirement plan distribution requirements, so long as all distributions from one employer—including members of a controlled group—do not exceed $100,000 to an individual.
    • There will be a three-year repayment period beginning the day after distribution, during which one or more repayments may be made, not to exceed, in aggregate, the amount distributed. Taxpayers can recontribute these amounts to an eligible retirement plan or IRA.
    • CRDs that are recontributed within the three-year period will be treated as having satisfied the general 60-day rollover requirement.
    • CRDs will be taxed ratably over a three-year period, unless an individual elects otherwise.
    • CRDs are not considered statutory “eligible rollover distributions” for purposes of 20 percent mandatory withholding, the notice provided to recipients of distributions eligible for rollover (i.e., “402(f) notice”) and direct rollover requirements (but do remain eligible for rollover).
  • The retirement plan loan maximum for a qualified individual (defined as meeting the COVID-19 or SARs-CoV-2 conditions described above) will increase to the lesser of $100,000, or 100 percent of a participant’s vested balance.
    • Retirement plan loan repayment dates that occur between the date of enactment and December 31, 2020, can be delayed for one year. Due dates of subsequent payments (payments after those that may be delayed one year) and the five-year amortization period will be adjusted accordingly.
  • Plan sponsors will generally be required to amend their retirement plans for these provisions by the last day of the 2022 plan year (government plans will have an additional two years), or such other date as the Secretary of the Treasury may prescribe, with operational compliance during the interim period.
  • Individuals, including beneficiaries, will not be required to take their 2020 required minimum distributions (RMDs) from their defined contribution plans or IRAs. This RMD waiver would also apply to individuals who turned 70½ in 2019 but did not take their RMD before January 1, 2020).
  • The 2020 year will not be counted for purposes of a five-year payout period for a beneficiary. (This provision will not alter a required beginning date for years after 2020.)
  • Single employer defined benefit pension plan minimum required contributions due during 2020 can be delayed to January 1, 2021 (adjusted for interim earnings). This provision will also provide an option to use an alternative funding target percentage.
  • This legislation adds “public health emergency” to those events that allow the Department of Labor to postpone certain deadlines governed by ERISA Section 518.

Health Savings Arrangement-Related Provisions 

  • For plan years before 2022, health insurance plans can pay for telehealth and remote care services without first satisfying HSA-qualifying deductible conditions.
  • A medicine or drug need not be obtained by prescription to be a qualified medical expense for HSA, HRA, MSA, and health FSA purposes. This includes over-the-counter menstrual care products.

Further developments, including any clarifying guidance issued by the IRS or other governing agencies, will be shared on ascensus.com.