Retirement Plan Considerations During COVID-19

Some common retirement plan questions and concerns that we are receiving:

  • Can we stop contributions?
  • Can we delay funding our plans?
  • Are furloughed employees considered terminated?
Quick answers include:
  • Discretionary contributions can stop;
  • Safe harbor contributions may be delayed or amended to stop if you follow certain procedures;
  • Loans, hardship distributions, in-service payments may be expanded;
  • Furloughed employees are not terminated; only terminated employees can receive their vested balances;
  • Pension due dates have not yet changed:
    • 7/31/20 for 5500s and extensions to 10/15/20 for calendar year plan;
    • 9/15/20 for funding benefits and 2019 deduction;
    • 12/31/20 finishing all outstanding issues for 2020
Keep in mind:
  • If a plan moves out of safe harbor, it may have to deal with top heavy issues and other compliance testing failures;
  • Participants can stop their deferrals at any time, even if starting and modifying elections is according to a schedule;
  • Terminating more than 20% of the workforce could be a “partial plan termination” with affected employees advancing to 100% vesting;
  • Don’t do anything without checking the plan document;
  • Remember, employees asking for money are going to be hurt more as the stock market continues to drop;
Patience is a virtue:
  • How many times do you want to do a plan amendment to give or take away a feature;
  • Lowering cash balance formulas is a more extreme move when the IRS only wants to see formula changes not more than every 3 years, or so;
  • Fiduciary considerations overshadow everything;
  • In a few years, we don’t want to be in DOL lawsuits for taking action now when no action is taken when everything gets back to normal
Adapted from article by:

Michael S. Miller, CEBS
Apex Pension Strategies, Inc.
Atlanta, GA 30356

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