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Reducing or Suspending 401(k) Safe Harbor Contributions Mid-Year under Notice 2020-52

An advisor calling RLC’s Resource Desk recently asked the following questions:  “My client is a business owner and has a standard 401(k) safe harbor plan.  Under what circumstances, if any, may he reduce or eliminate the company’s mandatory safe harbor contribution during the plan year? Is there any relief granted because of the impact of Covid-19?”   

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business. A recent call with a financial advisor from Washington is representative of a common inquiry related to 401(k) safe harbor plans.

Highlights of the Discussion

The following outlines the circumstances under which sponsors of 401(k) [and 403(b)] safe harbor plans may reduce or eliminate employer safe harbor contributions mid-year under normal circumstances, and under the special circumstances outlined in IRS Notice 2020-52 granted as a result of the Covid-19 pandemic.

Under normal circumstances, and according to final Treasury Regulations, a sponsor of a 401(k) safe harbor plan may amend the plan during the current year to reduce or suspend the company’s safe harbor contribution—either the matching or nonelective contribution—under the following limited circumstances.

A removal or reduction of a safe harbor contribution mid-year is permitted if the employer either

  1. Is operating under an economic loss for the year (See Internal Revenue Code Section (IRC 412(c)(2)(A);[1]

or

  1. Included a statement in the safe harbor notice given to participants before the start of the plan year that the employer
  • May reduce or suspend contributions mid-year;
  • Will give participants a supplemental notice (described below) regarding the reduction or suspension; and
  • Will not reduce or suspend employer contributions until at least 30 days after receipt of the supplemental notice.

COVID-19 Relief Any Plan Amended Between March 13, 2020, and August 31, 2020

Any sponsor of a safe harbor plan may amend its plan between March 13, 2020, and August 31, 2020, to reduce or suspend safe harbor contributions (either match or nonelective) without condition. However, special rules related to the supplemental notice apply as explained next.

Supplemental Notice

Typically, if a reduction or suspension of safe harbor contributions will occur, a 30-day advance notice rule applies. This supplemental notice must explain 1) the consequences of the suspension or reduction of contributions; 2) how participants may change their deferral elections as a result; and 3) when the amendment takes effect.

COVID-19 Relief for Supplement Notice for Nonelective Contributions

Sponsors who reduce or suspend 401(k) safe harbor nonelective contributions will satisfy the 30-day supplemental notice requirement, provided the sponsor

  • Gives the notice to employees no later than August 31, 2020, and
  • Adopts the required plan amendment no later than the effective date of the reduction or suspension of safe harbor nonelective contributions.

There is no relief on the timing of the supplemental notice under Notice 2020-52 for sponsors who reduce or suspend safe harbor matching contributions. Sponsors must give 30 days notice via a supplemental notice to participants before the reductions can take place.

Other Procedural Requirements

Typically, an employer that suspends or reduces safe harbor contributions must also

  1. Give participants a reasonable opportunity after they receive the supplemental notice and before the reduction or suspension of employer contributions to change their contribution elections;
  2. Amend the plan to apply the actual deferral percentage (ADP) and/or actual contribution percentage (ACP) Tests for the entire plan year; and
  3. Allocate to the plan any contributions that were promised before the amendment took effect.

Additional Notice 2020-52 Relief: Mid-Year Safe Harbor Contribution Reductions for Highly Compensated Employees

Pursuant to Notice 2020-52, a plan sponsor may choose to reduce or suspend 401(k) safe harbor contributions for highly compensated employees (HCEs) alone. In such cases, the plan sponsor must provide an

  • Updated safe harbor notice and
  • Opportunity for participants to update their elections, determined as of the date of issuance of the updated safe harbor notice.

Conclusion

In the past, the ability of sponsors to amend their 401(k) [or 403(b)] safe harbor plans to reduce or suspend employer matching or nonelective safe harbor contributions mid-year was limited. The IRS expanded those opportunities under IRS Notice 2020-52 in order to provide relief in light of the Covid-19 pandemic.

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Company Reimbursements—Employee Pay or Not?

“Are reimbursements that an employee receives from his or her employer for business expenses counted as income on Form W-2?”

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor from Texas is representative of a common inquiry related to what items constitute wages for plan purposes.

Highlights of the Discussion

Generally, reimbursements that an employee receives from his or her employer for business expenses count as pay or income on Form W-2 (box 1) only if the reimbursements are treated as paid under a “nonaccountable plan” as opposed to an “accountable plan” [See IRS Publication 15 (Circular E)] and Publication 463, Travel, Gift and Car Expenses]. Conversely, reimbursements paid from an accountable plan are not treated as employee pay or income, and are not reported on Form W-2. An employer makes the decision whether to reimburse employees under an accountable plan or a nonaccountable plan.

Accountable Plan

To be an accountable plan, an employer’s reimbursement or allowance arrangement must satisfy all of the following rules.

  1. Employee expenses must have a business connection; meaning, an employee must have paid or incurred deductible expenses while performing services as an employee of the employer;
  2. An employee must adequately account to his or her employer for these expenses within a reasonable period of time; and
  3. An employee must return any excess reimbursement or allowance within a reasonable period of time.

Nonaccountable Plan

A nonaccountable plan is a reimbursement or expense allowance arrangement that does not meet one or more of the three criteria listed above. Be aware, however, that even if an employer has an accountable plan (as described above), the IRS will treat the following payments as being paid under a nonaccountable plan:

  • Excess reimbursements an employee fails to return to the employer, or
  • Reimbursement of nondeductible expenses related to the employer’s business.

An employer will combine the amount of any reimbursement or other expense allowance paid under a nonaccountable plan with an employees wages, salary, or other income, and report the total in box 1 of Form W-2.

Conclusion

Whether reimbursements to an employee for business expenses count as pay or income for the recipient depends on whether the employer pays such amounts from an accountable or a nonaccountable plan.

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DOL Filing for Top Hat Plans

“Are top hat plans required to file a Form 5500 report with the Department of Labor (DOL)?”

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor from Washington is representative of a common inquiry related to top hat plans.

Highlights of the Discussion

Top hat plans (i.e., unfunded plans maintained for a select group of management or highly compensated employees) are exempt from most of the requirements of the Employee Retirement Income Security Act of 1974 (ERISA), including the need to file a Form 5500 series report. Instead, top hat plans are subject to an alternative method of compliance with the reporting and disclosure provisions of ERISA.

Sponsors of top hat plans are required to submit a “statement” to the DOL pursuant to DOL Reg. 2520.104–23 within 120 days of the plan’s effective date. As of August 16, 2019, it is mandatory for sponsors of such plans to file top hat plan statements electronically via the Top Hat Plan Statements Online Filing System. In March 2020, the DOL introduced its a top-hat plan statement search engine.

The information requested on the statement is quite simple:

  • Employer identification information (EIN, name, address);
  • Plan administrator information;
  • Number of top-hat plans maintained;
  • Number of participants in each plan; and
  • A declaration that the sponsor maintains the plan(s) primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees.

If a sponsor fails to file the top hat statement with the DOL, the plan could be subject to ERISA’s full reporting and disclosure requirements, and assessed penalties by the DOL and IRS. Corrections can be made through the Delinquent Filer Voluntary Compliance Program.

Conclusion

While a sponsor of a top hat plan does not have to file an annual Form 5500 series report for the plan, it must submit a statement to the DOL within 120 days of the plan’s effective date. Failure to do so could result in more burdensome reporting requirements and penalties.

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Auditor’s Report “Disclaimer of Opinion” for Form 5500 Filings

“What does it mean when the auditor’s report for a plan’s Form 5500 filing says the auditor, ‘does not express an opinion?’ I thought that was the whole purpose of the auditor’s report.”

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor from Colorado is representative of a common inquiry related to the report performed by an independent qualified public accountant (the auditor)[1] that accompanies certain Form 5500 filings

Highlights of the Discussion

Most likely, the plan in question was subject to a “limited-scope” audit rather than a “full-scope” audit of the plan’s financial information. Under a limited scope audit, the auditor can only render a “Disclaimer of Opinion,” because he or she was not able to obtain sufficient audit evidence to provide a basis for an audit opinion.

Under ERISA Sec. 103(a)(3)(C) and DOL Reg. 2520.103–8, plan sponsors may instruct the auditor not to perform any auditing procedures with respect to investment information prepared and certified by “qualified institutions.”  A qualified institution could be a bank, trust company or similar institution, or an insurance company that is regulated, supervised, and subject to periodic examination by a state or federal agency that acts as trustee or custodian for the investments. This option is referred to as a “limited scope audit,” and is available only if the certification by the qualified institution includes a statement that the information is complete and accurate. Limited-scope audits are typically less expensive that full scope audits.

Limited Scope Audit VS. Full Scope Audit

Limited Scope

Full Scope

The auditor does not audit the certified investment Information for the plan. He or she still tests participant data, including the allocation of investment income to individual participant accounts, and tests contributions, benefit payments and other information that was not certified. The auditor reviews the entity’s financial statements, including all assets; liabilities and obligations; and financial activities, without any limitation.

It is the responsibility of the plan sponsor to determine whether the conditions for limiting the scope of an auditor’s examination have been satisfied, and only the plan sponsor can request the auditor to limit the scope of the audit. The American Society of Certified Public Accountants (AICPA) has put together a “Limited Scope Audits Resource Center” to help plan sponsors satisfy their fiduciary responsibility in this area.

As an interesting aside, the Department of Labor (DOL) attributes the overall increase in noncompliant plan audits with the corresponding increase in the number of limited-scope audits performed.[2] According to a DOL report, “Assessing the Quality of Employee Benefit Plan Audits,” of the plans studied, 81 percent had limited scope audits and of those limited-scope audits, 60 percent contained major deficiencies. In fact, as a result of the study, the DOL recommended that Congress amend ERISA to repeal the limited-scope audit exemption.

To date there have been no law changes, but the AICPA Auditing Standards Board, in 2019, issued two new auditing standards related to the financial statements and annual reports of employee benefit plans, and transparency in annual reports:

  1. Statement on Auditing Standards(SAS) No. 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA; and
  2. Statement on Auditing Standards (SAS) No. 137, The Auditor’s Responsibilities Relating to Other Information Included in Annual Reports.

SAS 136 creates a new section in the AICPA Professional Standards, and deals with the auditor’s responsibility to form an opinion and report on the audit of financial statements of ERISA employee benefit plans. SAS 136 takes effect for audits of ERISA plan financial statements for periods ending on or after December 15, 2020. SAS 137 enhances transparency in reporting related to the auditor’s responsibilities for nonfinancial statement information included in annual reports.

SAS 136 will affect limited-scope audits when it takes effect by

  1. Referring to such audits as ERISA Sec.103(a)(3)(C) audits;
  2. Clarifying what is expected of the auditor, including specific, new procedures that apply when performing the audit; and
  3. Establishing a new form of report that provides greater transparency about the scope and nature of the audit, and describes the procedures performed on the certified investment information.

For a summary of the SAS 136 changes to Form 5500 reporting, please refer to AICPA’s At A Glance: New Auditing Standard for Employee Benefit Plans.

Conclusion

Limited scope audits of Form 5500 filings may only receive a Disclaimer of Opinion from the independent auditor. Note that for audits of plan information for periods ending on or after December 15, 2020, limited scope audits will change under new SAS 136 and SAS 137.

[1] Although there are exceptions, generally, Federal law requires employee benefit plans with 100 or more participants to have an audit as part of their obligation to file an annual return/report (Form 5500 Series).

[2] DOL, “Assessing the Quality of Employee Benefit Plan Audits,” 2015

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In-Service Distributions from Gov’t. 457(b) Plans

“Can a governmental 457(b) plan permit participants to take plan withdrawals while they are still working?”

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor from North Carolina is representative of a common inquiry related to in-service distributions from retirement plans.

Highlights of the Discussion

Yes, as a result of a law change effective in 2020, governmental 457(b) plans now have the ability to offer in-service distributions to participants starting at age 59 ½, if the sponsor has chosen to implement the provision.

Allowing age-59 ½ distributions was a significant change brought about by the Setting Every Community Up for Retirement Enhancement (SECURE) Act for plan years beginning after December 31, 2019. [See Division M: Bipartisan American Miners Act (Section 104) of the Further Consolidated Appropriations Act, 2020) for authorizing language.]

In the past, 457(b) plan participants could only access their plan assets upon

  • Reaching the age for required minimum distributions,
  • Severing employment,
  • Experiencing an unforeseeable emergency,
  • Qualifying for a one-time cash-out (i.e., the account balance was $5,000 or less, and there had been no employee contributions for at least two years),
  • Termination of the plan, or
  • Divorce, pursuant to a qualified domestic relations order.

Governmental 457(b) plan sponsors who offer these early withdrawals can implement them immediately, and amend their plan documents to authorize them later. Formal amendments to incorporate age-59 ½, in-service distributions are due by the end of the 2024 plan year.

A governmental 457(b) plan distribution would be taxable to the recipient, generally, unless the individual rolled it over to another eligible plan or IRA.

Conclusion

The list of distributable events for governmental 457(b) plans now includes in-service distributions at age 59 ½ for sponsors that choose to offer them.

 

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401(k)s, the 2020 RMD Waiver and Rollovers

“My client was told by his human resources representative that the 401(k) plan from his former place of work will distribute his 2020 RMD from the plan this year as usual. I thought that under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, all RMDs were waived for 2020. Can you clarify, please?”

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor from California is representative of a common inquiry related to required minimum distributions (RMDs) from 401(k) plans.

Highlights of the Discussion

The application of the IRS’s waiver of 2020 RMDs can be confusing for qualified retirement plans, because the plan sponsor can choose whether it will suspend all RMDs for 2020 or continue to distribute RMDs as usual under the terms of the plan.[1] Plans have the ability to distribute a participant’s plan balance without his or her consent once the assets are no longer “immediately distributable,” which is the later of the time a participant attains normal retirement age or age 62  [Treasury Regulation 1.411(a)-11(c)(4)].  Consequently, despite the IRS not treating the distribution as an RMD for 2020, a plan may continue to force the payment for the year. A likely reason would be to maintain consistent distribution processing procedures from year to year.

There is good news, however, for your client. Although, typically, RMDs are ineligible for rollover [IRC Sec. 402(c)(4)(B)], in this case, because the IRS does not consider the distribution as an RMD for 2020 (as a result of the CARES Act waiver), your client may roll over the amount —if it is otherwise eligible. (Note that the plan does not have to offer a direct rollover of the amount, nor withhold 20 percent for federal tax purposes. A 60-day, indirect rollover would still remain an option.)

Conclusion

Despite the temporary waiver of RMDs for 2020 allowed under the CARES Act, qualified plans may still choose to distribute such amounts. Therefore, it is imperative for participants and their financial advisors to know how their plans intend to address the optional 2020 RMD waiver and plan accordingly.

[1] The 2020 RMD waiver does not apply to defined benefit plans.

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Social Security and Economic Impact Payments

“My client is retired, receiving Social Security benefits and hasn’t filed a tax return for the last couple of years. For those collecting Social Security, how will the IRS issue Economic Impact Payments to these individuals?”

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor from New Jersey is representative of a common inquiry related to Covid-19 Economic Impact Payments

Highlights of the Discussion

According to an April 1, 2020, press release from the Treasury Department, Social Security beneficiaries who are not typically required to file tax returns will not need to file any additional forms or information in order to receive an Economic Impact Payment. Instead, payments will be automatically deposited to recipients’ bank accounts.

The IRS will use the information on the Form SSA-1099 and Form RRB-1099 to generate the Economic Impact Payments to Social Security recipients who did not file tax returns in 2018 or 2019. Recipients will receive these payments as a direct deposit or by paper check, just as they would normally receive their benefits.

Conclusion

Recipients of Social Security benefits who don’t file tax returns should automatically receive their Economic Impact Payments based on their Forms SSA-1099 and Form RRB-1099 in the form of a direct deposit or paper check.

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Delayed Deposits of Employee Salary Deferrals Due to Covid-19

“In a recent conversation with one of my plan sponsor clients, the business owner said that he had heard it was OK to delay depositing employee salary deferrals to his 401(k) plan because of Covid-19. Can that be true?”

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor from Nevada is representative of a common inquiry related to the timely depositing of employee salary deferrals to a 401(k) plan.

Highlights of the Discussion

Under limited circumstances, explained next, it may be possible to delay the deposit of deferrals, but we suggest exercising extreme caution in doing so, and carefully documenting the reasons for the delay. According to new guidance in EBSA Disaster Relief Notice 2020-01,  it may be possible to delay remitting to a plan employee salary deferrals that have been withheld from participants’ pay without sanction only if the delay is due to the Covid-19 outbreak. Moreover, “Employers and service providers must act reasonably, prudently, and in the interest of employees to comply as soon as administratively practicable under the circumstances.”[1]

The Department of Labor (DOL) has strict rules addressing the timing of deferral remission. Generally, plan sponsors of large 401(k) plans (those with 100 or more participants) must deposit deferrals as soon as they can be reasonably segregated from the employers’ assets, but not later than 15 business days following the month the deferrals are withheld from the participants’ pay [DOL Reg. 2510-3-102(a)(1) and (b)(1)].  A safe harbor deadline applies for small plans (those fewer than 100 participants) (i.e., plan sponsors in this case have seven business days following the day on which such amounts were withheld to deposit them to their plans [DOL Reg. 2510-3-102(a)(2)].

EBSA Disaster Relief Notice 2020-01 relaxes the remittance requirements for some employers. Specifically, the notice states:

The Department recognizes that some employers and service providers may not be able to forward participant payments and withholdings to employee pension benefit plans within prescribed timeframes during the period beginning on March 1, 2020, and ending on the 60th day following the announced end of the National Emergency. In such instances, the Department will not – solely on the basis of a failure attributable to the COVID-19 outbreak – take enforcement action with respect to a temporary delay in forwarding such payments or contributions to the plan.

The phrase, “… solely on the basis of a failure attributable to the COVID-19 outbreak,” is narrow. Therefore, if a delay is necessary, while it is still “fresh,” we suggest that a prudent course of action would be to clearly document and provide detail in the plan records (a.k.a., the “fiduciary file”) why the delay was attributable to COVID-19, and how the plan complied as soon as administratively practicable under the circumstances.

Conclusion

The timely deposit of employee salary deferral has always been a top concern of the DOL. While EBSA Disaster Relief Notice 2020-01 provides limited enforcement relief from missed deferral deposit deadlines caused by Covid-19 hurdles, employers and service providers must still act reasonably, prudently, and in the best interest of employees by depositing the deferrals as soon as practicable.

[1] EBSA Disaster Relief Notice 2020-01

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PPP loans and deductible employer plan contributions

“My client received a Payroll Protection Program (PPP) loan for his small business to help cover payroll expenses. He maintains a safe harbor 401(k) plan, and each year my client makes an annual lump sum contribution to the plan. The company will make its 2019 contribution in 2020, and the timing will be such that the contribution will be after the business received the PPP funds and during the 8-week loan forgiveness period. Can the business use some of the PPP loan to make the contribution and deduct the full amount of the 401(k) employer safe harbor contribution?”

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor from Massachusetts is representative of a common inquiry related to the PPP loan.

Highlights of the Discussion

This question can only be fully answered by your client’s tax professional and/or CPA.  The following response provides some general information on the topic based on the guidance issued to date. It’s for informational purposes only and cannot be relied upon as tax advice.

As it stands now, the IRS appears to take the position (in Notice 2020-32) that if a business uses the PPP loan for eligible expenses that would otherwise be deductible, the business cannot also take the tax deduction. That would be double dipping because the PPP loan, once forgiven, is not taxable income to the business. Consequently, that would mean if a business uses PPP funds to make employer contributions to a retirement plan as an eligible expense, and the PPP loan is forgiven, the business could not also deduct the employer contributions under Internal Revenue Code Sec. 404. Please see page 6-7 of Notice 2020-32 for a formal discussion.

There are some policy makers in Congress (e.g., Senate Finance Committee Chair Chuck Grassley, R-Iowa and House, Ways and Means Committee Chair Richard E. Neal, D-Mass) who are seeking to make changes to the IRS’s apparent stance on this tax issue. Therefore, it is important to watch for additional updates on this ever-evolving question of deductibility, and seek competent tax advice.

Conclusion

The various forms of Covid-19 relief granted to businesses and individuals come with myriad questions. Patience will be needed as answers trickle in, as well as the services of tax experts.

 

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Reporting Coronavirus-Related Distributions

“With the creation of Coronavirus-Related Distributions (CRDs) and the ability to pro rate the taxation and pay the withdrawal back within three years, how will retirement plan and IRA administrators, as well as individuals, report these transactions to the IRS? Won’t it be a big mess?”

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare. We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor from Washington is representative of a common inquiry related to CRDs.

Highlights of the Discussion

While we do not have definitive reporting guidance yet, we anticipate the IRS’s reporting procedures for CRDs will be similar to those the agency already has in place for “qualified disaster distributions” (QDDs). It seems we’ve been here before.

For CRDs, the IRS will waive the 10% early distribution penalty for the first $100,000 taken from an eligible retirement plan due to Coronavirus. Distribution recipients may pay back the amount within three years (2020, 2021 and 2022); and taxation can be spread over three years. The term ‘‘eligible retirement plan’’ includes an IRA (as well as an IRA-based plan), qualified plan, qualified annuity plan, governmental 457(b) plan or 403(b) plan.

Like CRDs, QDDs, were tax-favored withdrawals and repayments from certain retirement plans for taxpayers who suffered economic losses as a result of disasters like those for Hurricanes Harvey, Irma and Maria, and the California Wildfires. The most recent IRS Publication 976, Disaster Relief and Forms 8915-A, 2016 Qualified Disaster Retirement Plan Distributions and Repayments and 8915-B Qualified 2017 Disaster Retirement Plan Distributions and Repayments and their instructions (Instructions to Form 8915-A and Instructions to Form 8915-B) give us a pretty good idea of what the IRS will expect for CRDs with respect to reporting. No doubt there will be some “tweaks” needed to these materials to encompass CRDs, but at least we know we are not starting from scratch!

Conclusion

When and how much of a CRD a recipient pays back (rolls over) within the next three years will dictate his or her precise reporting protocol. Reporting will not be the same for everyone. It may involve filing amended tax returns, but rest assured there will be a manageable process for plan and IRA administrators, as well as IRA owners and plan participants to account for CRDs.

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