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Posted by Bernard Kaplan on Wed, Mar 25, 2020 @ 11:21 AM

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As Congress looks for ways to help businesses and individuals with the financial repercussions from the COVID-19 virus, the American Retirement Association (ARA) is pushing for a solution that involves relief from certain plan provisions.

The ARA has asked Congress to consider:

  • Waiving the 10% penalty on early withdrawals for individuals who can prove they live in a designated health emergency area (such as New York City or Seattle) and who have been financially affected by the pandemic.
  • Temporarily waiving the 2020 Required Minimum Distributions from defined contribution plans (401(k)), profit-sharing) and IRAs.
  • Increasing retirement plan loan limits to the lesser of $100,000 or 100% of the plan participant’s vested account balance in a plan.
  • Allowing individuals to delay repayments of their retirement plan loans for up to a year.
  • Allowing individuals who cannot repay their loans in a three-year period to pay the income tax associated with the default on the loans.
  • Establishing a wage credit for employers whose workforce was affected by the COVID-19 virus outbreak to encourage employee retention.
  • Waiving employer contributions that fulfill 2019 defined contribution plan obligations that have not already been made such as 401(k) safe harbor contributions for plans with less than 500 participants.
  • Suspending 2020 employer contribution obligations for employers with defined contribution plans such as 401(k) safe harbor contributions.
  • Waiving ADP/ACP nondiscrimination testing failures for plans suspending the safe harbor contribution.
  • Deferring tax-filing deadlines by 60 days (Form 5500, Form 8955-SSA).

Many of the relief measures proposed mirror earlier relief Congress provided for individuals and businesses affected by natural disasters. The Further Consolidated Appropriations Act, 2020 and the related Setting Every Community up for Retirement Enhancement (SECURE) Act included such plan provision relief. Economic recovery legislation released during the 2008 financial crisis also provided relief for individuals and businesses through easing off some of the penalties and repayment timeframes.

Prospects for Retirement Plan Relief for COVID-19

Developments from the COVID-19 virus are emerging very quickly, and Congress has taken several steps toward providing support and economic stimulus initiatives. “Phase 1,” signed into law on March 6, provided some additional funding for vaccines, testing, and additional health resources. “Phase 2,” signed into law on March 18, included the Families First Coronavirus Response Act. It provided employer payroll tax credits to help offset the costs of paid sick and family leave for individuals who are affected by the COVID-19 virus or who have to care for family members affected by the coronavirus disease 2019.

Late last week there was some hope that the retirement plan relief provisions would be included in a Phase 3 of Congressional relief measures along with small business loans, direct cash payments to individuals, and financial support for the airline industry. At the date of this publication, it does not appear that plan relief will make it into this Phase 3 offering.

We will continue to monitor for updates related to retirement plan relief as they become available. For more information about the impact the COVID-19 virus is having on businesses, please contact us.

Looking for more COVID-19 resources? Visit our resource center for expertise on impacts to expect and how your business can respond.

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KaplanBernie Kaplan is the Managing Director of the Retirement and Benefit Plan Services Group in the Boston office. He can be reached at 617.761.0541 or bkaplan@cbiz.com. Bernie consults on a wide variety of employee benefit topics including 403(b) plans, qualified retirement plans, executive compensation, nonqualified deferred compensation, section 409A and health care reform.

Tags: retirement plans, Bernard Kaplan, 401(k), the SECURE Act, retirement planning, COVID19, Coronavirus, Families First Coronavirus Response Act, COVID-19

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