CARES Act retirement plan provisions ending in 2020 or continuing in 2021

The only CARES Act relief provision that continues into 2021 is the provision on loan repayments. (Coronavirus-related distributions cannot be made after December 30, 2020 and coronavirus-related loans ended back in September.)

Generally, the CARES Act eliminated required minimum distributions from DC plans for 2020. This elimination carries over to 2021 for the 2020 minimum distribution for participants whose required beginning date is April 1, 2021.

The CARES Act allowed plans to suspend loan repayments due in 2020 on all loans (not just coronavirus-related loans). Repayments starting in 2021 must be adjusted to reflect the 2020 suspended payments.

IRS Notice 2020-50 provides plans with a safe harbor repayment method: Loans may be re-amortized and repaid in substantially level installments over the remaining period (including the extension) of the loan starting with first payment in 2021. The Notice also allows plans to adopt other reasonable interpretations of the CARES Act repayment provision including having loan repayments resume January 1, 2021 with the re-amortization schedule beginning one year from first suspended repayment.

The CARES Act does not require 2020 end-of-plan year amendments.

We summarized the impact of CARES Act on retirement plans in our March 30, 2020 compliance insight and discussed Notice 2020-50 in our July 10, 2020 compliance insight.

Deadline extensions that do or do not continue in 2021

The IRS, DOL and PBGC provided plan sponsors with temporary deadline extensions for many 2020 notices and filings.

All IRS deadline extensions have now expired. IRS also has not extended the relief provided under Notice 2020-42 with respect to witnessing spousal consents. The Notice provided relief from the in-person “physical presence” requirement for such witnessing through the use of live audio-video technologies and digital tools, but only through December 31, 2020.  [Update: The IRS announced on December 22, 2020 that it would extend the temporary relief from the physical presence requirement through June 30, 2021.]

PBGC’s disaster relief extensions are coordinated with IRS’s disaster relief extensions, and thus have also ended.

The DOL’s general deadline extension for DOL notices and filings, issued as EBSA Disaster Notice 2020-01, continues to apply in 2021. In general, however, DOL notices and filings continue to be due “as soon as reasonably practicable” after the original deadline.

Changes coming in the new year

This section notes several reminders for 2021.

Sponsors of 401(k) plans should prepare for participation of short-term part-time employees

The Setting Every Community Up for Retirement Enhancement Act (SECURE Act) created a new rule for 401(k) plans that requires those plans to allow short-term (three years), part-time (500 hours) employees to become participants and make elective contributions. The provision is effective for the 2021 plan year, but years before 2021 do not count for purposes of the three-year eligibility. Thus, plans need to be certain that, beginning in 2021, their recordkeeping systems are able to collect and maintain the necessary data. IRS Notice 2020-68 provides further guidance.

Lump-sum payments may be affected by PBGC change

Lump-sum payments made by ongoing DB plans may be affected by a change in PBGC’s lump-sum calculation methodology. Whether a specific plan is affected is directly dependent on the plan’s current language and the plan attorney’s interpretation of that language.

We discussed the PBGC regulation in our September 28, 2020 compliance insight.

Increased user fees for some IRS letter rulings for private sector plans

IRS Announcement 2020-14 provides for increased user fees for some letter rulings as of January 4, 2021. The user fee for multiemployer plans to submit a letter ruling request for a five-year automatic extension of the amortization period will increase from $1,000 to $6,500.

We discussed this fee increase in our August 21, 2020 compliance insight.