March 23, 2020
A Message to our Valued Clients and Partners:
First and foremost, we hope you, your families, and your employees and their families are safe and well. The team at PASI is making the best of the situation. Our staff are working remotely, and as such, we expect minimal interruptions to our business.
Although we are regularly checking our voicemails, coordinating scheduled calls through email exchanges is probably the most efficient means of communication.
We understand that you are extremely busy in these unprecedented times reacting to the rapidly changing business climate. This email is to alert you to significant topics surrounding retirement plans. If you think any of these topics are relevant to your business/organization, please contact your Plan Consultant. Addressing your concerns in these difficult times is absolutely our top priority.
Discontinuing Employer Contributions
It is absolutely imperative that you notify us of your intentions to discontinue any Employer Contributions to the Plan.
This is particularly true in the following situations:
- Your Plan is a Safe Harbor 401(k), a SIMPLE IRA or a SIMPLE 401(k).
- Your Plan is a Defined Benefit or Cash Balance Plan.
- Contributions to these Plans cannot be discontinued during a Plan Year after Participants have been credited with 1,000 hours of service, so prompt attention is required.
- This does not apply if your Defined Benefit / Cash Balance Plan is already “frozen.”
- If you have concerns about your ability to fund benefits that have already accrued (for example for the previous plan year) please let us know as soon as possible.
If you have already implemented Workforce Reductions in the form of furloughs or layoffs, please let us know as soon as possible so we can discuss the following considerations with you in greater detail.
- If based on the nature of the reduction, the individuals are no longer considered employees, they will be eligible to close their retirement plan accounts. In addition, any outstanding loans that they have will ultimately be treated as taxable distributions.
- In general, if more than 20% of your workforce is terminated, these affected employees (and in fact employees who terminated for other reasons) may become 100% vested in any employer contributions.
- If based on the nature of the reduction the employees are still considered active (e.g., a furlough due to a temporary shut-down) Participants will not be able to access their retirement funds unless they are otherwise eligible for an in-service distribution (e.g. hardships, age 59½ ).
- Participants in this situation who have Participant loans can suspend their payments for up to a year without adverse tax consequences.
Fast Approaching Deadlines
PASI is fully operational from home offices and able to assist with all deadlines.
If your inability to meet any deadlines is directly related to this crisis, it is possible (perhaps likely) that no penalties would be levied. Although we do anticipate formalized relief with respect to most (if not all) upcoming deadlines, and knowing the Federal government is currently occupied with other more pressing matters, the relief may not be provided until after the deadlines have passed or perhaps at the last minute.
Examples include, but are not limited to, the following:
- Age 70½ required minimum distributions are due no later than April 1, 2020, with respect to the first such required distribution.
- For Plan’s that have a June 30, 2019 Plan Year-End, the extended deadline for Form 5500’s is April 15, 2020.
- 403(b) Plans are required to be restated onto a pre-approved Plan document by March 31, 2020.
The due dates for personal 1040 tax returns and for “C-Corp” 1120 returns have already been extended from April 15th until July 15, 2020. This extension also applies to the payment of any taxes due with those returns and/or extensions.
There are numerous proposals being considered by the IRS, DOL, and Congress. We will keep you apprised of these developments.
Relief is expected in several areas, including:
- Addressing an employer’s inability to fund current employer contribution obligations.
- Participant’s ability to access retirement funds in order to supplement lost wages.
- Relief with respect to upcoming deadlines (as described above).
Please call us with any questions.