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IRS Extends Deadline to Roll Over Waived RMD Distributions / Provides Model Amendment

The IRS issued Notice 2020-51 which provides additional guidance and relief relating to the required minimum distribution (“RMD”) waiver provisions in Section 2203 of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act waived the requirement to make RMDs in 2020. Distributed amounts that—but for the CARES Act waiver—would have been RMDs are instead treated as eligible rollover distributions. Generally, the deadline to roll over an eligible rollover distribution into an IRA or another qualified plan is 60 days from the distribution date. However, for those eligible rollover distributions made in 2020 that otherwise would have been RMDs and for which the 60-day rollover period expires before August 31, 2020, the IRS extended the rollover deadline to August 31, 2020. Additionally, Notice 2020-51 includes a Q&A relating to the waiver of RMDs in 2020 and a model amendment that plan sponsors can adopt to provide… Continue Reading

Additional Federal Guidance Regarding COVID-19 and Telehealth Coverage: Some Employer Take-Aways

The U.S. Departments of Labor, Treasury, and Health and Human Services (the “Departments”) recently issued FAQs regarding the Families First Coronavirus Response Act, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), and COVID-19. A number of these FAQs address a group health plan’s required coverage of COVID-19 tests, including which tests must be covered, related facility fees, reimbursement rates, and balance billing to patients. Employers should ensure that the third party administrators of their group health plans have incorporated this guidance for plan administration purposes. In addition, some of the other FAQs may be of interest to employers. For example, the FAQs provide that, if a group health plan reverses the increased coverage of COVID-19 or telehealth after the COVID-19 public health emergency period is over, the Departments will consider the plan to have satisfied the requirement to provide advance notice of changes to the Summary of Benefits… Continue Reading

Have You Notified Participants of Extended Deadlines?

As noted in our prior post here, the U.S. Departments of Labor and Treasury recently issued a notice requiring all employee health and welfare benefit plans to disregard the period from March 1, 2020 until 60 days after the announced end of the COVID-19 National Emergency (or other announced date) when determining the deadline to request HIPAA special enrollment, elect COBRA coverage, make a COBRA premium payment, notify the plan of a COBRA qualifying event or determination of a disability, file a benefit claim or appeal, or request an external review of a benefit claim denial. Although the notice did not address whether plan participants needed to be notified of these extended deadlines, plan administrators should be aware that they likely have a fiduciary duty to accurately convey this information to participants. For example, a COBRA election notice that states a deadline to elect or make premium payments without mentioning… Continue Reading

IRS Issues Guidance on Employer COVID-19 Leave-Based Charitable Donation Payments

In Notice 2020-46, the IRS provided guidance allowing employers to make cash payments to certain charitable organizations in exchange for vacation, sick, or personal leave that its employees elect to forgo without otherwise including such amounts in the employees’ gross income. In order to qualify for this relief, the payments must be made to a qualifying charitable organization no later than December 31, 2020 for the relief of victims of the COVID-19 pandemic as set forth in President Trump’s March 13, 2020 declaration of a nationwide emergency (a copy of which is available here). The employees will not be treated as constructively receiving any of the amounts they elect to forgo under the program, and the employees cannot claim a charitable contribution deduction with respect to the value of the forgone paid leave. Employers should (i) make sure that any election made by their employees is in writing and the recipient… Continue Reading

IRS Expands Definition of Qualified Individual for Loans and Coronavirus-Related Distributions under the CARES Act

Notice 2020-50 provides additional guidance to taxpayers and sponsors of qualified retirement plans regarding coronavirus-related distributions and loan extensions under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). Among the guidance included in Notice 2020-50 are the following three items of special importance to plan sponsors: Notice 2020-50 expands the definition of “Qualified Individual” for purposes of eligibility to receive a coronavirus-related distribution or special loan treatment to also include three new categories of individuals: an individual having a reduction in pay (or self-employment income) due to COVID-19 or having a job offer rescinded or start date for a job delayed due to COVID-19; an individual whose spouse or a member of the individual’s household (as defined below) is quarantined, furloughed or laid off, or has work hours reduced due to COVID-19, is unable to work due to lack of childcare due to COVID-19, has a reduction… Continue Reading

The IRS Amends COVID-19 Relief to Add Additional Time-Sensitive Actions

Previously, IRS Notice 2020-23 extended the due dates for certain tax payments, filings, and other “Time-Sensitive Actions” that would ordinarily fall on or after April 1, 2020 through July 14, 2020 to July 15, 2020. See our prior blog post on Notice 2020-23 here. The IRS recently issued Notice 2020-35 to make additional Time-Sensitive Actions eligible for relief. For example, under this new guidance, an employer that receives a compliance statement issued under the voluntary correction program (VCP) component of the Employee Plans Compliance Resolution System (EPCRS) with a 150-day deadline to implement all corrective actions that ends between April 1, 2020 through July 14, 2020 has until July 15, 2020 to implement the corrections. A full list of the Time-Sensitive Actions is included in Section III.B of Notice 2020-35, which is available here.

Employer Friendly Changes to PPP Loan Forgiveness Requirements

On June 5, 2020, the President signed the Paycheck Protection Program Flexibility Act (the “Act”), which made certain changes to the requirements of forgivable loans made under the Paycheck Protection Program (“PPP”). For a PPP loan to be forgiven, the loan proceeds must be used to cover payroll and other approved operating costs incurred by the employer during a designated time period following the date on which the loan was made (the “Coverage Period”). The Act extended the coverage period from eight to 24 weeks and reduced the percentage of loan proceeds that must be used to cover payroll costs during the Coverage Period to 60% (down from 75%). Accordingly, up to 40% of the loan proceeds could be used by an employer to cover other non-payroll operating costs, such as rent, utilities, and interest on its other debt obligations that are due during the Coverage Period. The Act is… Continue Reading

Reminder: A Severance Policy Could be an ERISA Plan

As the coronavirus pandemic continues, many employers have been forced to reduce their workforce, oftentimes paying some form of severance to their employees. One area that continues to cause confusion among employers is whether their severance policy is an employee benefit plan subject to ERISA. Generally, informal arrangements that feature one-time payments in response to ad hoc situations and that do not have an ongoing administrative scheme will not be subject to ERISA. However, it is not always clear when such arrangements become “employee benefit plans” that are subject to ERISA. It is generally not to the employer’s advantage to have its severance strategy characterized as an informal arrangement not subject to ERISA. For example, the beneficiary of such an arrangement would be able to sue in state court for benefits, which could expose the employer to larger damage awards than are available under ERISA. Employers should ask their counsel… Continue Reading

IRS Relief Allows Individuals to Make Participant Elections Electronically

Treasury Regulations § 1.401(a)-21(d)(6) requires participant elections, including spousal consents, to be witnessed in the physical presence of a plan representative or notary public.  In light of the COVID-19 pandemic, the IRS recently issued Notice 2020-42 (the “Notice”) to allow individuals making participant elections to do so through electronic means for the period from January 1, 2020 through December 31, 2020.  For participant elections, including spousal consents, that require a signature to be witnessed in the physical presence of a notary public, the “physical presence” requirement is satisfied if remote notarization is done through live audio-video technology that otherwise satisfies the requirements of Treasury Regulations § 1.401(a)-21(d)(6) and is compliant with state law applicable to notaries.  For participant elections, including spousal consents, that require a signature to be witnessed in the physical presence of a plan representative, the “physical presence” requirement is satisfied if (i) the person signing the participant… Continue Reading

IRS Issues Memorandum Providing Guidance on Income Inclusion, FICA, and Income Tax Withholding for Stock-Settled Equity Awards

The IRS recently issued Generic Legal Advice Memorandum No. AM 2020-004 (the “GLAM”) to address when income from nonqualified stock options, stock-settled stock appreciation rights, and stock-settled restricted stock units is (i) includable in an employee’s gross income, (ii) subject to FICA taxes, and (iii) subject to federal income tax withholding. In addition, the GLAM provides a discussion of the deposit rules for FICA and income tax withholdings that have been withheld with respect to such equity awards, including the “One-Day” rule (or the Next-Day Deposit Rule) that requires employers to deposit employment taxes on the next banking day after $100,000 or more in employment taxes have been accumulated. The GLAM provides a series of illustrative examples and analyses of such issues. The GLAM does not, however, address the impact of an employer’s ability to defer employment tax deposits under Section 2302 of the Coronavirus, Aid, Relief and Economic Security… Continue Reading

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