Post-CARES Act: A Checklist for Retirement Plan Sponsors
As of this writing, the loan and distribution provisions of the CARES Act have not been extended. This means that these provisions expired on or before December 31, 2020. Considering this, plan sponsors should ensure that any CARES Act provisions added to their retirement plans are administered in accordance with the expiration dates. This includes:
- Loan Repayment Suspensions — For plans that adopted the loan repayment suspension provision, payments with a due date beginning in January 2021 can no longer be suspended. Communication stating that loan repayments will now resume must be sent to participants who elected to suspend loan repayment from March to December of 2020. It should also be confirmed that the suspended repayments will be re-amortized (with interest) over the remainder of the loan, and that the term of the loan was extended by one year.
- Required Minimum Distributions (RMDs) — RMDs will resume in 2021, after being suspended in 2020. However, there is no minimum required distribution due for anyone on April 1st of this year since the CARES Act also suspended the distributions that would be due on that date. Thus, the deadline for 2021 RMDs will be 12/31/2021. With this being said, plan sponsors should confirm that all participants with a 2021 RMD will be notified accordingly. (Note that due to the SECURE Act, fewer participants will have RMD requirements in 2021 because of the increase in the RMD age from 70½ to 72).
- CARES Act Distributions — For plans that allowed coronavirus-related distributions, plan sponsors should confirm that no such distributions were processed after December 30th (due to a quirk in the CARES Act, the deadline was December 30th and not December 31st). This includes any distribution requests received prior to December 31st that could not be processed before that date, due to not being received in good order (e.g., missing information). The distribution date is considered to be the date the money left the account, not the date it was requested.
- CARES Act Loans — While the deadline for CARES Act loans actually occurred several months ago (September 22,2020), plan sponsors that permitted these loans should confirm that no new CARES Act loans were disbursed after that date.
Plan sponsors should touch base with their recordkeeper(s), TPA, and other service providers to ensure that they are also in compliance with the expiration dates. The time for plan sponsors to take appropriate action in this regard is now, before any future plan or DOL/IRS audits uncover compliance defects.
Note: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. Opinions expressed are those of the author, and do not necessarily represent the opinions of Cammack Retirement Group.
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