The U.S. Senate and House of Representatives overwhelmingly passed a $900 billion COVID-19 relief bill Monday night. The key provisions put together from Karen Kerber regarding PPP and other issues can be found here.
From a retirement plan standpoint, the key provisions in the bill include:
CARES Act Provisions NOT Extended
A disappointing aspect of the package was that the CARES Act provisions, perhaps most importantly the loan suspension, was not extended past the original sunset dates. As a reminder, that means that participants who elected to suspend loans under the CARES Act should be expecting them to resume with the first paycheck in January of 2021.
More information on the original CARES Act Provisions can be found here.
Partial Plan Termination Relief
The recently passed COVID stimulus package provides safe harbor relief to employers from the partial plan termination rules stating:
“A plan shall not be treated as having a partial termination (within the meaning of 411(d)(3) of the Internal Revenue Code of 1986) during any plan year which includes the period beginning on March 13, 2020, and ending on March 31, 2021, if the number of active participants covered by the plan on March 31, 2021 is at least 80 percent of the number of active participants covered by the plan on March 13, 2020.”
This is a key bit of relief as avoiding a partial plan termination means not having to bring affected participants to full vesting (don’t receive 100% of employer contributions without meeting plan requirements). It is important to note that the 80 percent is based on headcount, not identical employees. In other words, if some terminated participants from the above time period found alternative employment and do not return to work for that employer, but the employer filled their vacancy with another individual, the hire counts towards the 80 percent.
Disaster Relief
The package also provides typical disaster relief (distributions and loans) for participants that reside in a presidentially declared disaster area. It is important to note, this is not a COVID provision and does not apply to areas declared disasters due to COVID. As with other disaster relief packages, this increases the distribution/loan amounts up to $100,000 with no penalty, allows for tax liability to be spread over three years, and allows the amounts to be repaid to a qualified plan or IRA to avoid taxation.
Money Purchase Pension Plans
The legislation clarifies that the CARES Act relief extends to money purchase pension plans.
Additional Retirement Relief
The package also includes a few other retirement related bits of relief:
• Allowing certain construction/building trade workers at the age of 55 to receive retirement benefits with the ability to continue to work while receiving benefits.
• Relief of qualified pension plan transfers for covering future retiree costs within pension plan.
• Changes to the Employee Retention Tax Credit which covers wages and benefits, including 401(k) contributions.
If you have any questions how the provisions could affect you or your retirement plan, please reach out to the KerberRose team.