Our society continues to be affected by the COVID-19 pandemic and employers are confronted with difficult decisions regarding staffing and expense reductions. These decisions often negatively impact employees and their families.

The recently passed Coronavirus Aid, Relief and Economic Security (CARES) Act provides relief to qualified individuals through increased access to their retirement savings. Furthermore, the CARES Act provides funding relief to plan sponsors of defined benefit plans.

Below is a summary of the changes specific to Defined Contributions Plans [401(k), 403(b), profit sharing and Governmental 457(b) plans] and Individual Retirement Accounts (IRAs) contained within the CARES Act.

The Coronavirus-Related Distribution and the loan provisions contained within the CARES Act are available only for qualified individuals. A qualified individual is defined as an:

Plan sponsors may rely on an individual’s self-certification that they are eligible to receive a Coronavirus-Related Distribution or increased participant plan loan. There is no additional substantiation or verification requirement for plan sponsors.

Plan sponsors should keep in mind that these provisions are optional, except for the RMD waiver. Retirement plans may adopt the provisions immediately and implement the amendments later, but no later than the last day of the 2022 plan year. It will be important to keep in communication with plan recordkeepers and third-party administrators (TPA) regarding these operational changes to plans resulting from provisions made available by the CARES Act.

Below is a summary of funding relief for Defined Benefit Plans:

Plan sponsors with single-employer defined benefit plans should understand these pension provisions are optional. The key will be to quickly come up with an action plan to either make contributions on their original due dates or delay the contributions.

Plan sponsors should also be aware that the CARES Act allows the Employee Retirement Income Security Act of 1974 (ERISA) to give the Department of Labor (DOL) the ability to postpone filing deadlines under applicable ERISA provisions for retirement plans affected by a public health emergency. We will monitor for more information to come on the filing deadlines.

As a plan sponsor, you may have questions as you start to implement these new changes to retirement plans. CSH’s Benefit Plan Administration & Consulting Advisors are here to help you stay compliant, manage risk and make smarter decisions during this economically challenging time.

Looking for more information about the impact of coronavirus on businesses? Visit our COVID-19: Business Continuity & Recovery Resource Center to read more.

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