IRS Extends Contribution Interval for Outlined Profit Pension Plans for Particular person Employers – Employment and Human Sources
IRS extends contribution period for defined benefit pension plans for individual employers
December 02, 2020
Hodgson Russ LLP
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The IRS issued Notice 2020-82 extending the deadline for contributions to defined benefit plans for individual employers under Section 3608 (a) (1) of the CARES Act.
These guidelines apply to sponsors of individual defined benefit plans that must meet the minimum funding standards set out in Code Section 412 (a). Generally, Code Section 430 (j) (1) requires that the minimum required contributions be made within 8½ months of the end of the plan year. Plans that have experienced a funding shortage in the previous plan year are subject to the quarterly rate requirements of Code Section 430 (j) (3).
In both situations, the CARES Act extended the deadline for defined benefit pension contributions from an individual employer to January 1, 2021. In this way, Congress wanted to allow plan sponsors to defer contributions due to the adverse financial effects of the pandemic. Due to the New Year holidays and the potential inability of financial institutions to send funds on time, Notice 2020-82 provides that a contribution to a defined benefit plan for an individual employer should be timely if made no later than January 4, 2021. next business day.
Notice 2020-82 also extends the deadline to January 4, 2021 for choosing a plan sponsor to top up a pre-financing balance or to use a pre-financing account balance to offset the minimum contribution required for the 2020 plan year. The guidelines also provide that if a contribution is made by January 4, 2021, the amount of the minimum required contribution that will be covered by the contribution (and the amount that will be added to the pre-financing balance of the plan in relation to any excess contribution can) is determined by calculating the applicable interest rate adjustment using the actual contribution date.
The guidelines do not affect the existing 2020-61 Notice, which addresses the treatment of late contributions that are not made on time. Pension Benefit Guarantee Corporation has issued guidance on compliance with Notice 2020-82.
The content of this article is intended to provide general guidance on the subject. You should seek advice from a professional about your particular circumstances.
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