Pension & Benefits News IRS extends CARES Act due date for contributions to DB plans
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Tuesday, December 15, 2020

IRS extends CARES Act due date for contributions to DB plans

By Pension and Benefits Editorial Staff

The IRS has announced that it will treat a contribution to a single employer defined benefit (DB) plan with an extended due date of January 1, 2021, pursuant to Section 3608(a)(1) of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act, P.L. 116-136), as timely if it is made no later than January 4, 2021.

Due date extended. Section 3608(a)(1) of the CARES Act provides that any minimum required contribution that would otherwise be due under Code Sec. 430(j) (and ERISA Sec. 303(j) during calendar year 2020 (including quarterly installments under Code Sec. 430(j)(3) and ERISA Sec.303(j)(3)) is due on January 1, 2021.

The CARES Act extension of the due date for contributions to January 1, 2021 is intended to allow employers sponsoring these plans to defer these payment obligations until calendar year 2021. However, financial institutions cannot transfer funds on the January 1, 2021 due date. The IRS observes that this effectively requires many employers to make these contributions prior to January 1, 2021, which would be inconsistent with the legislative intent. Accordingly, the IRS will treat a contribution with an extended due date of January 1, 2021, as timely if made no later than January 4, 2021 (which is the first business day after January 1, 2021).

Note that, for a contribution that is made by January 4, 2021, the amount of the minimum required contribution that is satisfied by the contribution (and the amount that may be added to the plan’s prefunding balance on account of any excess contribution) is determined by computing the applicable interest adjustment using the actual contribution date.

In addition, if the plan year is a plan year for which the extended due date for minimum required contributions under the CARES Act applies, the deadline for a plan sponsor’s election to add to a prefunding balance or to use a prefunding balance or a funding standard carryover balance to offset the minimum required contribution for that plan year is extended to January 4, 2021.

Source: IRS Notice 2020-82.

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