Federal Agencies Extend Deadlines for Employee Benefit Plan Matters | Ballard Spahr srl



The Internal Revenue Service has published Notice 2020-23, which automatically postpones certain deadlines affecting employee benefit plans. More specifically, any deadline that would normally fall from April 1, 2020 until July 14, 2020, is now automatically extended until July 15, 2020. The highlights are as follows:

Plan loan repayments. When plan members borrow from their defined contribution plan accounts, they typically have to repay the loan within five years, usually in monthly installments. Participants with monthly loan repayments that are otherwise due during the delay period (April 1, 2020 to July 14, 2020), now have until July 15, 2020 to make these repayments. However, plan sponsors are not required to implement the loan repayment deadline and may choose not to, especially for plan members who continue to be actively employed and who repay their loans through holdbacks. salary.

Form 5500 Deposits. Benefit plans with plan years ending on or after June 30, 2020 and through November 30, 2020 now have until at least July 15, 2020 to file their 5500s.

Second. 83 (b) Elections. When an individual receives property (such as restricted stock or similar interest) as compensation for the provision of services, and such property is subject to a substantial risk of forfeiture (that is to say, property is not vested), the individual is not subject to compensation tax until the property becomes vested. However, the individual has the right to make an election under section 83 (b) to close the offsetting element and be immediately subject to ordinary income tax. In doing so, the individual will receive treatment for capital gains (which is taxed at a lower rate) on any future appreciation of the property. Elections under section 83 (b) must generally be filed with the IRS within 30 days of the date the restricted property is received by the individual, but if the end of the 30 day period falls within the deadline, the end of the 30-day deadline is automatically extended until July 15, 2020.

Refund of optional excess carry-overs. In the 401 (k), 403 (b) and government 457 (b) plans, optional employee deferrals are limited to an annual dollar amount. For 2019, the limit was $ 19,000 (plus an additional $ 6,000 for participants aged 50 or over). To the extent that employee optional deferrals have exceeded this limit for 2019, the plan is required to reimburse excess optional deferrals (and any related investment income) to the member by April 15, 2020. As directed by the IRS, the deadline for reimbursement of excess optional deferrals is extended until July 15, 2020.

60 day rollover period. When an individual receives a qualifying rollover distribution from a qualifying pension plan or IRA as an indirect rollover, that distribution may be rolled over as part of a tax-free rollover to a pension plan. eligible, including an IRA, no later than the 60th day after the day the person received the distribution. If the end of the 60-day period fell within the delay period, the end of the 60-day period is automatically extended until July 15, 2020.

ESOP put options. In employee share ownership plans (ESOPs) managed by many private employers, participants are entitled to receive distributions from their ESOP accounts in the form of employer shares, and have the right to resell those shares to the employer under a “put option”. The put option must be available for a period of at least 60 days following the date of distribution of the employer’s shares of the ESOP, and if the put option is not exercised, for an additional period. 60 days in the next plan year. If the end of the 60-day period fell within the delay period, the end of the 60-day period is automatically extended until July 15, 2020.

Section 1042 Transactions and Qualifying Replacement Property. If a taxpayer sells employer securities to an ESOP, the taxpayer may defer the inclusion of the proceeds of the sale in income under Section 1042 of the Internal Revenue Code by investing the proceeds in “property.” eligible replacement ”. Qualified replacement assets must be purchased during the replacement period, which is defined as the period starting three months before the date of the sale of qualified securities to an ESOP and ending 12 months after the date of that sale. If the end of this period falls within the time limit, the end of the period of purchase of an eligible replacement property is automatically extended until July 15, 2020.

Withdrawals from Qualifying Automatic Contribution Agreements (“EACA”). A section 401 (k), 403 (b) or government section 457 (b) plan may provide for automatic enrollment of participants. If certain conditions are met, such a plan may allow an automatically enrolled member to withdraw amounts that have been automatically deducted and paid into their account under the plan. The withdrawal must take place within 90 days of the date of the employee’s first contribution to the EACA. If the end of the 90-day period fell within the delay period, the end of the 90-day period is automatically extended until July 15, 2020.

Extended timeframe for initial corrective change period. IRS Income procedure 2019-39 provides a system of recurring corrective change periods to correct deformities for individually designed and pre-approved 403 (b) plans. The IRS has extended the deadline for the initial corrective amendment period for Section 403 (b) plans from March 31, 2020 to June 30, 2020.

Extended deadline for PBGC bonuses. In addition, the Pension Benefit Guaranty Corporation (PBGC) recently announcement that it will extend the deadlines until July 15, 2020, for future payments of PBGC insurance premiums and certain other required deposits that would otherwise have been due from April 1, 2020, until July 14, 2020.

Click here to read our Customer Alert on PBGC Pandemic Assistance for Pensions.


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