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