Over the past week, a major focus of the Coronavirus Aid, Relief, and Economic Security (CARES) Act has been the availability of Paycheck Protection Program loans through the Small Business Administration. However, the CARES Act also includes several new provisions related to retirement plans associated with distributions, loans, and required minimum distributions that plan sponsors need to adopt.
Plan sponsors should fully understand the impact of the retirement plan provisions available under the CARES Act and how they will be implemented by their recordkeepers. Some recordkeepers may automatically incorporate these new provisions into plans, while others may require some type of affirmation from the plan sponsor.
We understand that certain recordkeepers are using an email notification opt-in system, advising that nothing has to be done to implement the new provisions if the email notification is opened by the plan administrator. In this scenario, if the recordkeeper receives confirmation the email was opened and the plan administrator has not contacted them to stop the implementation, they consider the plan sponsor as having implicitly approved and adopted the new provisions. If the email notification was not opened, then the new provisions will not be added to the plan.
Plan trustees have a personal fiduciary obligation to act in the best interest of plan participants, and if you have not already discussed these changes with your recordkeeper, we recommend that you call them as soon as possible. In addition, plan sponsors that do not currently offer loan provisions will require a formal amendment to allow the issuance of loans for the increased amounts within the CARES Act.
It is also important to determine your communication responsibility and strategy for notifying plan participants of the potential impact of these transactions – not only on their long-term retirement goals, but also on their personal tax situation.
If you have not already reached out to your record keeper to discuss the CARES Act provisions, we recommend contacting them now to avoid potential confusion among plan participants and unintended plan compliance deficiencies in regards to CARES Act accounting.
If you need assistance with this or any other COVID-19 related matters, please contact your Kreischer Miller relationship professional or any member of our team. We also continue to update our COVID-19 Resource Center, which you can access here.
Information contained in this alert should not be construed as the rendering of specific accounting, tax, or other advice. Material may become outdated and anyone using this should research and update to ensure accuracy. In no event will the publisher be liable for any damages, direct, indirect, or consequential, claimed to result from use of the material contained in this alert. Readers are encouraged to consult with their advisors before making any decisions.