As a plan sponsor, I want to offer the CARES Act withdrawal provisions to my participants. How do I do that?
Plan sponsors may, but are not required to, offer COVID-19 related distributions and loan relief. Plan sponsors that wish to implement all or part of this relief should contact their dedicated Client Relationship Manager (CRM) for more details regarding the steps
necessary to implement. Please note that every plan that offers these withdrawal options will be required to amend their plan document no later than the last day of the 2022 plan year (2024 for governmental plans). TRA will assist you with meeting these amendment requirements as well.
How do I handle outstanding participant loans while our business is temporarily closed or while employees are not working for longer periods?
If possible, continue to withhold and submit loan payments for participant loans as you have historically. The CARES Act does allow qualified individuals with loan payments due between March 27, 2020 and December 31, 2020 to delay their repayments up to one year. If you have a qualified individual that is looking to defer their repayments, please discuss with your Client Relationship Manager (CRM) to ensure steps are taken to avoid the loan from being mistakenly defaulted during that time.
Can I stop my Safe Harbor Contributions?
Yes, as a TRA client, if you amend the plan document to remove the Safe Harbor provision. Keep in mind, removing the Safe Harbor provision will subject the plan to non-discrimination testing, including ADP, ACP, and top-heavy testing. A 30-day notice is required and the Safe Harbor contribution must be made until the effective date of the amendment (TRA will provide you with the notice when the amendment is drafted). Please contact your TRA CRM to discuss your plan specifically, and to initiate the amendment.
On June 29, 2020, the IRS issued additional guidance (IRS notice 2020-52), clarifying that sponsors who reduce or suspend 401(k) safe harbor nonelective contributions will satisfy the 30-day supplemental notice requirement, provided the sponsor:
- Gives the notice to employees no later than August 31, 2020
- Adopts the required plan amendment no later than the effective date of the reduction or suspension of safe harbor nonelective contributions.
There is no relief on the timing of the supplemental notice under Notice 2020-52 for sponsors who reduce or suspend safe harbor matching contributions. Sponsors must give 30 days’ notice via a supplemental notice to participants before the reductions can take place.