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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

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

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

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

PPP Loans: SBA Releases New Loan Forgiveness Application and Instructions

The Small Business Administration (“SBA”) recently released a form Loan Forgiveness Application and instructions related to the potentially forgivable loans made under the Paycheck Protection Program (“PPP”). PPP loans are generally forgivable if, among other things, the loan proceeds are used to cover certain payroll costs incurred over the eight-week period after the loan is made (for additional information on PPP loans, see our prior blog posts here, here, here, and here). To apply for the forgiveness of a PPP loan, borrowers should complete a Loan Forgiveness Application, which can be completed in either paper or electronic form, and then send the completed application to its lender. The Loan Forgiveness Application and instructions are available here. For additional information on the Loan Forgiveness Application and other recent SBA Guidance, see the following Haynes and Boone article: SBA Issues New Guidance via Interim Final Rule on Foreign Affiliates; Releases Loan Forgiveness… Continue Reading

Use Care When Implementing CARES Act Retirement Plan Distributions – State Law and Benefit Offset Concerns

As we have previously reported on our blog here and here, the CARES Act provided relief to participants in retirement plans by allowing employers to amend their retirement plans to include certain coronavirus-related distributions and to permit increased loan amounts for certain qualified individuals. Many employers have agreed to adopt these changes, and under federal law, the treatment of these distributions is clear. But there are other issues that employers and employees should consider, including: The coronavirus-related distributions could be subject to taxation under state law, even if the employee later repays the distribution to the plan; and If employees are receiving unemployment and/or disability benefits, the coronavirus-related distributions may reduce or offset these benefits. However, the enhanced loans would not be subject to taxation and may not offset unemployment and disability benefits, which may make the enhanced loan a better option for employees who anticipate paying back the distribution.… Continue Reading

DOL Issues Relief for Plan Fiduciaries

The DOL’s Employee Benefits Security Administration (“EBSA”) recently issued EBSA Disaster Relief Notice 2020-01. Notice 2020-01 applies to employee benefit plans, employers, labor organizations, and other plan sponsors, plan fiduciaries, participants and beneficiaries, and service providers subject to ERISA. Notice 2020-01 remains in effect from March 1, 2020 until 60 days after the announcement of the end of the presidentially declared national emergency due to COVID-19 (the “National Emergency”). Untimely Notice Relief Fiduciaries of ERISA plans generally have an obligation to provide notices and disclosures in accordance with the timing requirements of ERISA. However, under Notice 2020-01, the employee benefit plan and the responsible plan fiduciary will not be considered to violate ERISA for failing to timely furnish a notice, disclosure, or document that must be furnished between March 1, 2020 and 60 days after the announced end of the National Emergency, if the plan and responsible fiduciary act in… Continue Reading

CARES Act: Calculating Qualified Health Plan Expenses for Purposes of the Employee Retention Credit

Under the CARES Act, employers are eligible to claim an employee retention credit if certain conditions are met (see our prior blog post on the employee retention credit, as well as other employee benefits and executive compensation changes made by the CARES Act, here). The tax credit is equal to 50% of “qualified wages” paid to employees of up to $10,000. Qualified wages include (i) wages actually paid to covered employees (other than qualified paid sick and family leave wages for which a credit is allowed under the Families First Coronavirus Response Act) and (ii) the “qualified health plan expenses” allocable to such employees. On May 11, 2020, the IRS published new FAQs clarifying how qualified health plan expenses should be calculated for purposes of the employee retention credit. Notably, the FAQs provide guidance on how to calculate such expenses when an employer sponsors more than one health plan (e.g.,… Continue Reading

IRS Releases FAQs on Retirement Plan Relief Under the CARES Act

The IRS recently published guidance in the form of FAQs related to the implementation of retirement plan relief available under the CARES Act. While the guidance does not resolve all of the open issues, it does provide some helpful clarifications and insight into what we may expect from future guidance. Specifically, the guidance confirms that the CARES Act provisions allowing for coronavirus-related distributions (“CRDs”) and loan relief are permissible, not required. Furthermore, the guidance points out that even if a 401(k) plan decides not to allow CRDs, if an individual meets the requirements to be a “qualified individual,” he or she may be able to treat other plan distributions as a CRD for federal tax purposes. Individuals need to consult with their personal tax advisors on these matters. Finally, alluding to what we may expect from future guidance, the CARES Act FAQs referred back to IRS Notice 2005-92 (issued on… Continue Reading

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