Published May 28, 2020 – The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law by the President of the United States on March 27, 2020. The CARES Act, among its many provisions, provides relief for both retirement plan participants and plan sponsors. A summary of the key provisions impacting retirement plans is provided below:
Defined benefit plans
To assist sponsors of single-employer defined benefit plans in maintaining cash flow, Section 3608 of the CARES Act provides a deferral for minimum required contributions originally scheduled to be made during calendar year 2020 to January 1, 2021. This also includes quarterly contributions due in 2020. Contributions that are deferred will be adjusted for interest during the period between the original due date and when the payment is actually made. This interest adjustment is to be made based on the plan’s effective interest rate for the plan year in which the contribution relates.
Additionally, Section 3608 of the CARES Act addresses a defined benefit plan’s adjusted funding target attainment percentage (AFTAP). A plan’s AFTAP can impact the level of benefit restrictions applicable to a defined benefit plan as specified by Section 436 of the IRC, including whether or not lump sum or other accelerated benefit payments may be paid, when plan amendments can take effect, and whether benefits can continue to accrue. Under the CARES Act, a defined benefit plan sponsor can elect to treat its plan’s AFTAP for the last plan year ending before January 1, 2020 as the AFTAP for the plan years that include calendar year 2020. Since Section 3608 does not specifically address plans with non-calendar year-ends, we recommend consultation with your retirement plan administrator or plan attorney to determine applicability.
This article is an excerpt from Dopkins COVID-19 Employee Benefits Newsletter. To read the complete content, please click here.
For more information, please contact Vincent Pasini at firstname.lastname@example.org or Justin Renaud at email@example.com.
About the Author
Justin S. Renaud CPA
Justin is a member of Dopkins Assurance Services Group. He helps provide management with financial information by researching and analyzing accounts and preparing financial statements.
About the Author
Vincent Pasini CPA
Vincent Pasini holds extensive experience in contract design, management and review/audit of financial statements.