In response to the COVID-19 pandemic, the IRS has issued Notice 2020-23, which automatically extends the deadlines for certain filing obligations that would otherwise be due on or after April 1, 2020, and before July 15, 2020. Since the relief is automatic, no action is needed by plan sponsors to take advantage of the extended deadlines.
As most of the nation continues under lockdown due to the COVID-19 pandemic, we have received inquiries about ways employers can provide additional benefits to employees during this unprecedented time.
On March 13, 2020, the COVID-19 pandemic was declared a “disaster” by President Trump under the Stafford Act. While this designation may not be enough to permit hardship distributions from all retirement plans, the “disaster” declaration under the Stafford Act does trigger availability of Code Section 139 – a little known and seldom used provision in the tax code added after the 9/11 terrorist attacks – that will permit an employer to provide tax-free “qualified disaster relief payments” to employees, if they meet certain requirements. First highlighted by our tax colleagues in a blog post on April 6, 2020, here we expand on how Code Section 139 works for our employer clients considering such a program.
COVID-19 and Leave-Sharing Plans
In these difficult times, some employees may want to donate some of their accrued paid-time off, vacation, or leave to help other employees take leave to recover from COVID-19 or to care for family members with COVID-19. This can be accomplished through a “Leave-Sharing Plan” set up by their employer.
Under normal tax rules, the leave donation would have to be treated as an assignment of income that is taxable to the employee donating the leave. However, the IRS allows such a donation to be made on a tax-free basis if it is done pursuant to a Leave-Sharing Plan that meets IRS requirements for a “Medical Leave-Sharing Plan” or a “Major Disaster Leave-Sharing Plan.” Note that in both types of plans, the employee who receives the donated leave will be taxed on the pay for the donated leave.
In this series premiere, Brad Campbell and Sarah Bassler Millar discuss the evolution of ERISA over the last 45 years, efforts at the Federal and State levels to increase participation in retirement savings plans, potential changes in legislation and what to expect from regulatory agencies in the coming years.
Visitors can also download the podcast
Missed last month’s Benefits & Breakfast meeting on the latest developments in welfare plans in Chicago, Los Angeles and Philadelphia? We have you covered!
Listen to recordings for each meeting, where we covered the following topics:
- New Health Reimbursement Account (HRA) Regulations – Will a standalone HRA work for you?
- Recent Welfare Plan Litigation – Are you prepared to defend a lawsuit based on your current plan documentation and procedures?
- Privacy – Are changes to the HIPAA Privacy Rule in the future? Will new California privacy rules affect you?
- Health Plan Executive Order – What is coming for HSAs, FSAs, and health care price transparency initiatives?
The DOL’s newly released final regulation on “Association Retirement Plans” (ARPs) will make it easier for groups and associations of employers to jointly sponsor a combined 401(k) or other defined contribution plan. (These plans are also referred to as multiple employer plans or “MEPs.”) In recent years, there has been a push to permit service providers to create “Open MEPs,” which are plans of unrelated employers having no business connection, or what the DOL refers to as “commonality” (i.e., a relationship unrelated to employee benefits). The hope is that these plans will provide small businesses with a cost-efficient and minimally burdensome avenue for offering retirement savings opportunities to workers.