A NON-TECHNICAL REVIEW OF QUALIFIED RETIREMENT PLAN LEGISLATIVE AND ADMINISTRATIVE ISSUES
beginning on the first day of the disaster period and ending 180 days from the last day of the incident period .
PAYCHECK PROTECTION PROGRAM ( PPP ) ROUND 2
The Act provides increased PPP funding and eligibility to those small businesses that have been hit hard by the COVID-19 pandemic . The Act extends the PPP through March 31 , 2021 and allocates additional funds for forgivable loans . Among other important changes , the law allows eligible borrowers a second PPP forgivable loan for small businesses and non-profits with 300 or fewer employees that can demonstrate a 25 % loss of gross receipts in any quarter during 2020 when compared to the same quarter in 2019 . ■ segregated ” from the employer ’ s general accounts . As a result , employee deferrals must be deposited by the earlier of the date that the contributions can be reasonably segregated from the company ’ s general assets , or the 15th business day of the month following the month in which the pay date occurs .
For plans with fewer than 100 participants on the first day of the year , the DOL created a safe harbor standard that states that any deposits made within seven business days of a pay date are considered timely even if the deposits could have been made earlier . Unlike small plans , large plans cannot rely on the safe harbor deadline . For large plans , the DOL states that elective deferrals must be deposited “ as soon as administratively feasible .” It is important to note that the DOL will often look at the actual deposit history when determining the deposit deadline and , if the company made deposits more quickly , will set that as the deadline for all other deposits . For example , if a company ever made a deposit within one or two days following a pay date , the DOL may take the position that all of the deposits should have been made within one or two days .
IS THERE PANDEMIC RELIEF FOR LATE DEPOSITS ?
PROPER HANDLING OF EMPLOYEE 401 ( K ) DEFERRAL CONTRIBUTIONS AND LOAN REPAYMENTS IS ONE OF THE MOST IMPORTANT RESPONSIBILITIES A PLAN SPONSOR UNDERTAKES . Failure to timely deposit employee deferrals and participant loan repayments is considered by many service providers to be one of the most commonly made retirement plan errors . Although it may be a common error , the IRS and DOL consider timely deposits a top priority . If loan repayments and / or salary deferrals are deposited outside of the timeframe described below , the company is considered to have committed a “ prohibited transaction ” by being in possession of plan assets . The DOL treats this as a loan from the plan to the employer which is prohibited by law and requires a documented correction process .
WHAT IS THE DEADLINE TO DEPOSIT EMPLOYEE DEFERRALS AND LOAN REPAYMENTS ?
Once withheld from the participant ’ s pay , deferrals and loan payments become plan assets as soon they can be “ reasonably
WAS RELIEF PROVIDED DUE TO THE COVID-19 PANDEMIC ?
On April 29 , 2020 , the DOL issued EBSA Disaster Relief Notice 2020-01 in response to the COVID-19 pandemic . The Notice provided guidance intended to relax the rules related to the required timeframe to deposit employee salary deferral contributions and loan repayments .
The Notice states that “ 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 . Employers and service providers must act reasonably , prudently , and in the interest of employees to comply as soon as administratively practicable under the circumstances .”
If an employer was unable to deposit elective deferral contributions timely “ solely on the basis of a failure attributable to the COVID-19 outbreak ,” it is important that documentation
BENEFIT INSIGHTS WINTER 2021