Pub. 2 2020 Issue 5

11 nebraska society of cpas W W W . N E S C P A . O R G Heather C. Panick is counsel in Koley Jessen’s Employment De- partment. She focuses her practice on employee benefits and executive compensation. She assists clients in drafting health and welfare plans, deferred compensation agreements under Code Section 409A, and tax-related issues in the administration, compliance, and design of qualified and nonqualified retirement plans. She can be reached at heather.panick@koleyjessen.com. applies to loan repayments due between March 27, 2020, and December 31, 2020, and extends the due date for the payments for up to a year. Contrary to how the Act was originally interpreted, Notice 2020-50 provides that individuals may take CRDs and loans to address adverse financial consequences experienced by a spouse or household member. This enables an individual to receive a plan loan or CRD in order to offset the financial distress caused by the furlough of his or her spouse or other household member. 3. Required Minimum Distributions The Act also provides that plans can waive required minimum distributions (RMDs) for 2020. This means that participants with an RMD due in 2020, including those who turned age 70½ in 2019 and would have had to take the first RMD by April 1, 2020, can skip receiving these distributions for this year. The IRS recently published Notice 2020-51 which provides that anyone who has already received an RMD in 2020 may roll those funds back into a qualified retirement account, as long as the rollover is completed prior to August 31. 4. Safe Harbor Contributions The IRS has provided temporary relief from certain requirements relating to mid- year amendments to safe harbor 401(k) plans to reduce or suspend safe harbor contributions. Typically, an amendment to reduce or suspend future safe harbor matching contributions or safe harbor nonelective contributions can only be made during the plan year if the amendment also provides that the ADP test will be satisfied for the entire plan year, and the employer is either operating at an economic loss for the plan year or the plan’s safe harbor notice included a statement that the plan may be amended to reduce or suspend safe harbor contributions, upon 30 days’ notice to participants. Notice 2020-52 provides relief from these requirements. Under the Notice, if a plan amendment (adopted between March 13, 2020, and August 31, 2020) reduces or suspends safe harbor matching contributions or safe harbor nonelective contributions for the plan year, the plan will not be treated as failing to satisfy the requirements set forth above. In addition, if the plan amendment reduces or suspends safe harbor nonelective contributions, the plan will not be treated as failing the safe harbor requirements if a supplemental notice is not provided to the eligible employees at least 30 days before the reduction or suspension is effective, as long as the supplemental notice is provided to eligible employees no later than August 31, 2020, and the amendment is adopted no later than the effective date of the reduction or suspension in contributions. This provision does not apply to safe harbor matching contributions. Health & Welfare Plan Provisions 1. Cafeteria Plan Amendments In addition to the optional changes in retirement plan benefits, the CARES Act also included amendment options for cafeteria plans. For example, the Act provides that medical flexible spending accounts (FSAs) and health savings accounts (HSAs) can reimburse for feminine care products and over-the- counter medications without a prescription. In addition, Notice 2020-29, which was issued by the IRS to add f lexibility to cafeteria plans, allows employers to amend their cafeteria plans to provide additional mid-year elections, i.e., make a new election, or revoke an existing election, to employer-sponsored health coverage, Health FSAs, and dependent care assistance programs (DCAPs). Notice 2020-29 also permits employers to extend the grace period relating to unused amounts in Health FSAs and DCAPs, as of the end of the 2020 grace period or 2020 plan year, to pay or reimburse qualified expenses through December 31, 2020. Moreover, the Health FSA carryover limit for a plan year starting in 2020 has been increased to $550. An employer desiring to make any of the changes described above must immediately inform the employees who are eligible to participate in the cafeteria plan about the changes, but has until December 31, 2021, to adopt the plan amendment. 2. Key Deadline Extensions In addition to reviewing plan documents and drafting the necessary amendments, an employer should also review its health and welfare plans for compliance with Notice 2020-01, which was published jointly by the Department of Labor, Treasury Department, and the Internal Revenue Service on April 28, 2020, and announced an extension to several key deadlines under the Employee Retirement Income Security Act (ERISA). Under the Notice, the period from March 1, 2020, through the 60th day after the announcement of the end of the national emergency (the “Outbreak Period”) shall be disregarded for all plan participants and beneficiaries in determining: • The 30-day period (or 60-day period, if applicable) to request special enrollment; • The 60-day election period for COBRA continuation coverage; • The date for making COBRA premium payments, i.e., 45 days following the COBRA election; • The date for individuals to notify the plan of a qualifying event or disability; • The date for filing a claim for benefits or an appeal under the plan’s claim procedures; and • For group health plans, the date for providing a COBRA election notice. The Notice also provides an extension of time for plan officials to provide benefit statement, annual f unding notices, and other ERISA-required notices and disclosures as long as a good faith effort is made to provide the documents as soon as administratively practicable. Action Steps Clients should be encouraged to review their employee benefit plans and do the following: • Decide whether to implement any of the CARES Act retirement plan options; • Decide whether to implement any of the CARES Act or IRS Notice cafeteria plan options; • Ac tively review and monitor employees who are eligible for COBRA or are making COBRA premium payments to ensure compliance with the deadline delays; and • Consider revising their traditional safe harbor notices going forward t o p e r m i t t he emp l oye r t o reduce or suspend safe harbor contributions upon 30 days’ notice to participants. t