April 24, 2020

IRS Extends Various 401(k) Deadlines in Response to COVID-19 Crisis

On April 9, 2020, the Internal Revenue Service (“IRS”) released Notice 2020-23 which, among other things, extends a number of recent deadlines applicable to retirement plans (including 401(k) plans), as well as to other employee benefit plans and arrangements. Generally stated, Notice 2020-23 automatically extends deadlines for certain “time sensitive acts” that would otherwise fall on or after April 1, 2020, and before July 15, 2020, until July 15, 2020.

Background. Earlier this year, the IRS announced that the Federal tax filing date for most US taxpayers would automatically be extended from April 15, 2020 to July 15, 2020. In conjunction with that extension, the IRS later announced in Notice 2020-18 that the deadline for making employer contributions to defined contribution pension plans (including 401(k) plans) would similarly be extended. (In other words, 401(k) plan sponsors now have until July 15, 2020, as opposed to April 15, 2020, to make their 401(k) employer contributions for the 2019 plan year.) Notice 2020-23 expands upon Notice 2020-18, extending the list of actions that previously were due in or after April 2020 that now may be postponed until July 15, 2020.

Relief Apples to All Employers. Although the relief is granted in response to the COVID-19 pandemic, unlike the 401(k) provisions contained in the CARES Act (see our previous blog here), the deadline extensions in Notice 2020-23 are available to all employers – not only to those which have been directly affected by the pandemic. Further, the relief is automatic – there is no need for employers to file for an extension.

List of Extended 401(k) Plan Deadlines. Pursuant to Notice 2020-23, the following deadlines relating to 401(k) plans, that otherwise would fall on or after April 1, 2020 and before July 15, 2020, are extended until July 15, 2020 (this article does not address provisions that do not apply to 401(k) plans):

  • The deadline for employers to make their 401(k) plan contributions for the 2019 taxable year (as previously stated, this extension had previously been granted in IRS Notice 2020-18).
  • The deadline for a participant to make a 401(k) plan loan payment, taking into account any applicable cure period.

NOTE:  Separately, the CARES Act provides that, if a plan loan repayment is due between March 27, 2020 and before the end of the year 2020, then the repayment is delayed for one year, as measured from the original due date. See our previous blog for more details.

  • The deadline for a 401(k) plan participant to complete an indirect rollover (sometimes known as a sixty-day rollover) to an eligible retirement plan.

OBSERVATION: In other words, if the sixty-day rollover period would otherwise end on or after April 1, 2020 and before July 15, 2020, then the 60-sixty-day deadline in which to complete the rollover is extended until July 15, 2020.

  • The deadline for an employer to distribute employee deferrals in excess of the applicable annual limit ($19.500 for 2020, or $26,000 for participants age 50 or older), adjusted for earnings, made to 401(k) plans.
  • The deadline for an employer to distribute employee deferrals, adjusted for earnings, to comply with certain nondiscrimination testing requirements (the “ADP test”), and also to avoid imposition of the ten-percent penalty tax.
  • The deadline for an employer to distribute employer matching contributions, adjusted for earnings, to comply with certain nondiscrimination testing requirements (the “ACP test”), and also to avoid imposition of the ten-percent penalty tax.
  • The deadline for an employer to distribute employer contributions made in excess of the Internal Revenue Code’s deduction limits, in order to avoid imposition of the 10 percent penalty tax.
  • The deadline for a 401(k) plan participant to take an initial required minimum distribution (“RMD”) from a plan by the April 1st of the year following the year in which the participant attains age 72.

OBSERVATION: Separately, the CARES Act eliminates the requirement to take RMDs, for the 2020 calendar year only. Since this is an optional provision, a participant could nevertheless elect to take an RMD in 2020 and, if so, presumably the RMD would have to be taken by July 15, 2020.                                          

  • The deadline for a participant to elect a permissible withdrawal under a 401(k) plan having an “eligible automatic contribution arrangement” (“EACA”).
  • The deadline for an employer or plan sponsor to file a 401(k) plan’s annual Form 5500 series return (assuming that the filing deadline falls within the April 1 through July 15 extension period).

NOTE: Ironically, this relief does not automatically extend the deadline for 2019 calendar year plans, because the due date for calendar year 2019 Form 5500 filings for such plans is July 31, 2020 — which is after the July 15, 2020 cut-off point.

The extension does automatically apply to Form 5500 filings for plan years that end in September, October, or November 2019, because the routine due dates for these filings would be, April 30, June 1, and June 30, 2020, respectively. Note that 401(k) plan sponsors may always obtain a regular extension by timely filing Form 5558, where such extension does not occur automatically.

OBSERVATION: The IRS and the Department of Labor (“DOL”) share authority with respect to the submission of the Form 5500 annual report series; in fact, the reports are actually submitted (electronically) to the DOL. Although Notice 2020-23 extends the Form 5500 filing deadline until July 15, 2020 from the vantage point of the IRS, notably, the DOL has not yet officially issued an official deadline extension.

  • The deadline for an employer or plan sponsor to complete self-correction of certain 401(k) plan operational failures by the last day of the second plan year following the plan year in which the failure occurs, under the IRS’ EPCRS.

COMMENT: Each of the above listed deadlines are “time sensitive acts” as defined in Revenue Procedure 2018-58, which is explicitly referenced in, and incorporated into, Notice 2020-23.

PREVIOUS COVID-19 RELATED BLOGS:

For more information about how the COVID-19 crisis may affect your 401(k) plan and health & welfare plan, please visit our previous blogs below:

The information and content contained in this blog post are for general informational purposes only, and does not, and is not intended to, constitute legal advice. As always, for specific questions concerning your 401(k) retirement plan, or for help in operating your plan during the current COVID-19 crisis, please consult your own ERISA attorney or professional advisor.

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