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Posted by on April 7, 2020

Understanding the CARES Act

On Friday, March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), a massive relief bill for those suffering as a result of the Coronavirus pandemic, was signed into law. Besides the generalized financial relief afforded to individuals, as well as loans and other concessions for businesses, the bill includes the following provisions to help participants and employer sponsors of retirement plans.

  • Coronavirus-Related Distributions
  • Loan Limit Increases and Delays in Repayment
  • Required Minimum Distribution Requirements for 2020
  • Single Employer DB Funding Delay
  • DOL Authority to Postpone Deadlines
  • Remedial Amendment Period Extended to 2022
  • Hardships
  • Partial Plan Termination Rules
  • Upcoming Compliance Deadlines for Calendar-Year Plans

Ask the Experts

Question: When is my 2019 employer contribution due to be funded to our plan?

Answer: For deduction purposes, the general deadline for all employer contributions for a plan year is the tax return deadline for the company including extensions. For most entity types, this would be either March 15th or April 15th of the following year. An extension could provide up to another 6 months beyond those dates.

No relief was given to tax returns due on March 15, 2020. If your tax return deadline was March 15, 2020, and you did not file an extension, your 2019 contributions were due to the plan by March 15, 2020. Otherwise, your deposit deadline for all 2019 employer contributions is your extended due date.

The IRS has provided relief for taxpayers (including business returns) due on April 15, 2020 to July 15, 2020. This also automatically extends the due date for contribution funding for such entities to July 15, 2020 with a normal company tax return deadline of April 15, 2020.

Unfortunately, no such relief has yet been provided for tax returns due on May 15, June 15, or any other date besides April 15. This includes tax returns currently on extension beyond April 15. The extension deadlines are still applicable, barring any further relief announced by the IRS.

Question: What other ways is the CARES Act helping businesses?

Answer: If you are a small business, you should talk to your accountant or banker about the CARES Act Payroll Protection Program. Under that program, you may be eligible to receive a very low interest loan from the government to help you fund your payroll (including taxes, health premiums, and retirement plan contributions) for a 2 ½ month period. In addition, if you meet other conditions, the entire loan may be forgiven. For small companies, this can be the difference between keeping doors open and not. The funds available for this are limited and the government has indicated that it will respond on a first come, first served basis. So, you should jump on this if you are interested.

This newsletter is intended to provide general information on matters of interest in the area of qualified retirement plans and is distributed with the understanding that the publisher and distributor are not rendering legal, tax or other professional advice. Readers should not act or rely on any information in this newsletter without first seeking the advice of an independent tax advisor such as an attorney or CPA.

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