Summer To-Do List: Determination Letter Filing for Cash Balance Plans and Pension Equity Plans

The IRS deadline to file for a determination letter for an individually designed statutory hybrid plan is August 31, 2020. Statutory hybrid plans include cash balance plans, pension equity plans and certain other variable annuity plans. This deadline has not been extended under any recent IRS pandemic-related guidance.

Beginning in 2017, the IRS suspended the cyclic determination letter program for individually designed retirement plans. However, subsequent IRS guidance established a limited window for statutory hybrid plans to apply for a new determination letter.

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IRS Issues New Guidance for Mid-Year Changes to Safe Harbor 401(k) and 403(b) Plans

On June 29, 2020, the IRS issued Notice 2020-52 addressing mid-year reductions and suspensions of contributions to Safe Harbor 401(k) and 403(b) plans. In response to the COVID-19 pandemic, the Notice provides some temporary relief for plan sponsors that wish to reduce or eliminate safe harbor contributions mid-year.

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IRS Guidance on Employer-Based Leave Donation Programs for COVID-19 Relief Organizations

In recent years, it has become the norm for the IRS to respond to a federally declared disaster by issuing guidance enabling employers to establish “Leave Donation Programs,” which allow employees to “convert” accrued vacation, sick, or personal leave benefits into an employer-paid monetary donation to a charitable relief organization, without the employee being taxed on the value of donated leave.1 Therefore, it is not surprising, but certainly welcome, that the IRS recently issued Notice 2020-46 (the Notice) to allow employers to adopt the same type of employer-based Leave Donation Programs in response to the COVID-19 pandemic.

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Temporary Relief from “Physical Presence” Requirement for Participant Elections

On June 3, 2020, the Treasury Department issued Notice 2020-42 providing temporary relief from the requirement for a plan representative or notary public to be physically present to witness certain participant elections (including spousal consents), which has been exceptionally difficult to satisfy while following COVID-19 shelter-in-place orders and social distancing guidelines.

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Agency Guidance on Health & Welfare Issues Related to COVID-19

As the COVID-19 pandemic continues, our clients are dealing with rapidly evolving compliance issues with respect to health and welfare benefit plans and the implementation of existing and new regulatory requirements. Below is a chart providing links to guidance issued by various government agencies with respect to health and welfare plan issues related to COVID-19. This chart is current as of May 12, 2020. There are a number of questions and issues outstanding, and we expect further guidance. Please contact your Faegre Drinker attorney with questions and/or updates regarding this guidance.

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IRS Extends Filing Deadlines for Employee Benefit Plans

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.

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IRS Says Employer Shared Responsibility Payment Not Subject to Statute of Limitations

The IRS Office of Chief Counsel recently issued a memorandum (https://www.irs.gov/pub/irs-lafa/20200801f.pdf) that responded with a resounding “No” to the question of whether an employer shared responsibility payment (ESRP) imposed under Internal Revenue Code §4980H is subject to any statute of limitations on assessment.

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2019 ACA Information Reporting: IRS Extends Deadline and Good Faith Relief

In IRS Notice 2019-63, the IRS extended the deadline to March 2, 2020, for employers and health insurance providers to provide individuals with 2019 Forms 1095-B and 1095-C (previous date was January 31, 2020). Nonetheless, the IRS encourages employers and other coverage providers to furnish 2019 statements as soon as possible.

Below is background on the information reporting requirements added by the Affordable Care Act (“ACA”) under Internal Revenue Code sections 6055 and 6056:

IRS Announces 2020 Dollar Limits for Employee Benefit Plans

The IRS has announced the dollar limits for contributions and benefits in retirement plans and certain deferred compensation plans for 2020. We have compiled a chart summarizing the key limits below, including how they compare with those in the previous year. Plan sponsors should confirm with their recordkeepers that all systems have been updated to reflect the 2020 limits.

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IRS Limited Expansion of Determination Letter Program

On September 1, 2019, the IRS reopened its determination letter program for two types of individually designed retirement plans: statutory hybrid plans and merged plans. For a detailed review of this limited expansion of the determination letter program, see our client alert, “IRS Announces Limited Expansion of the Determination Letter Program for Individually Designed Plans.”

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