PBGC / IRS Guidance on CARES Act

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The CARES Act, signed into law in March 2020, provided contribution relief to employers by allowing contributions to be delayed until the end of 2020. What became uncertain was the impact this relief would have on PBGC and IRS requirements that make use of the delayed contributions. Recent guidance has provided some clarity on these matters.

PBGC

The PBGC released a set of FAQs in July that addressed two key areas:

  • PBGC Premiums: The FAQs clarified that payment / filing deadlines will not be extended.  Further, they added that contributions delayed by the CARES Act will simply not be reflected in plan assets for premium purposes, since amended filings will not be allowed for such purposes.
  • Reportable Events: The FAQs clarified that delayed contributions will not trigger a reportable event (assuming timely payment) since the delay was provided for by law.

The FAQs can be found on the PBGC website here.

IRS

The IRS released Notice 2020-61 in August, using a similar question-and-answer approach to various issues including the following:

  • The deadline for the Form 5500 due in 2020 will not be impacted by the delay.  Amended filings are allowed to reflect delayed contributions and thereby avoid potential excise taxes; however, the deadline for contributions to be made for tax deductibility purposes under Code Section 404 is unchanged.
  • The extended deadline applies to all contributions, including those above the minimum required contribution.  The deadlines for adding contributions to the prefunding balance and for applying the prefunding balance towards the minimum required contribution are extended as well.
  • The plan sponsor can elect to use the prior year’s AFTAP for current year certification purposes.  The actuary would still need to certify the current year (most likely after delayed contributions are made to the trust) in preparation for 2021 thresholds.

The Notice can be found here.

Feel free to reach out to your Foster & Foster consultant with any questions you may have.