President Trump signed into law Friday, June 5, the Paycheck Protection Program Flexibility Act of 2020, legislation that the Senate approved Wednesday night. The legislation extends elements of and makes certain other adjustments to the Paycheck Protection Program (PPP). This Small Business Administration lending program was created by the Coronavirus Aid, Relief, and Economic Security Act to help small employers meet payroll and other expenses as businesses and the nation deal with the economic effects of the novel coronavirus pandemic.
Importantly, if certain conditions are met, PPP loans can be forgiven and treated as a grant. Payroll expenses can include employer contributions to defined contribution and defined benefit retirement plans, as well as providing group health care coverage, including payment of insurance premiums.
Among its provisions, this legislation will have the following effects.
- Extends from 8 to 24 weeks from the time of loan origination the period in which expenses paid with a PPP loan could be eligible for loan forgiveness (not to extend beyond December 31, 2020)
- Reduces from 75 percent to 60 percent the portion of a loan that must be used for payroll expenses (vs. overhead, etc.) and remain eligible for loan forgiveness
- Extends from 2 to 5 years the period for loan repayment for borrowed amounts not forgiven
- Provides no impediment to loan forgiveness for the documented inability to hire similarly qualified placement employees or to rehire former employees
- Allows a borrower who received a PPP loan before enactment of this legislation to elect that the covered period run for 8 (vs. 24) weeks
On Wednesday night, the U.S. Senate approved by voice vote H.R. 7010, the House-passed Paycheck Protection Program Flexibility Act of 2020. The legislation extends elements of and makes certain other adjustments to the Paycheck Protection Program (PPP). This Small Business Administration lending program was created by the Coronavirus Aid, Relief, and Economic Security Act, to help small employers meet payroll and other expenses as businesses and the nation deal with the economic effects of the novel coronavirus pandemic.
Importantly, if certain conditions are met, PPP loans can be forgiven and treated as a grant. Payroll expenses can include employer contributions to defined contribution and defined benefit retirement plans, as well as providing group health care coverage, including payment of insurance premiums.
Among its provisions, the legislation now presented to President Trump—who is expected to sign it into law—would have the following effects.
- Extend from 8 to 24 weeks from the time of loan origination the period in which expenses paid with a PPP loan could be eligible for loan forgiveness (not to extend beyond December 31, 2020)
- Reduce from 75% to 60% the portion of a loan that must be used for payroll expenses (vs overhead, etc.) and remain eligible for loan forgiveness
- Extend from 2 to 5 years the period for loan repayment for borrowed amounts not forgive
- The documented inability to hire similarly qualified placement employees or to rehire former employees will not be an impediment to loan forgiveness
- A borrower who received a PPP loan before enactment of this legislation may elect that the covered period run for 8 (vs 24) weeks
Nearly seven months after releasing proposed regulations, the Department of Labor (DOL) has released final regulations on default electronic delivery of retirement plan disclosures.
On May 28, 2020, the IRS issued limited additional relief that extends deadlines for certain time-sensitive actions related to tax-advantaged savings arrangements. Most awaited was an extension for providing information returns for IRAs, health savings accounts (HSAs), Archer medical savings accounts (MSAs), and Coverdell education savings accounts (ESAs). These information returns are Form 5498, IRA Contribution Information, Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information, and Form 5498- ESA, Coverdell ESA Contribution Information.
Deadlines for providing these information returns to the IRS and to account owners had previously been extended by IRS Notice 2020-23 through July 15, 2020, in response to the coronavirus (COVID-19) pandemic. The deadline for annual contributions to these accounts was also extended to July 15, 2020. This presented custodial organizations and service providers to these accounts with the dilemma of reporting contributions that could be received as late as the deadline for their reporting.
Notice 2020-35 now provides a six-week window after the July 15, 2020, contribution deadlines in which organizations can prepare and provide these information returns to the IRS and to account owners.
Other Deadlines Not Extended
Notice 2020-23 extended many other deadlines to July 15, 2020, including completing rollovers, making retirement plan loan payments, filing Form 5500, Annual Return, Report of Employee Benefit Plan, as well as numerous others. These deadlines are not extended by the latest guidance in Notice 2020-35.
Extensions Granted by Notice 2020-35
The following are among the limited number of deadlines extended by Notice 2020-35.
- Providing Form 5498-series information returns for IRAs, ESAs, HSAs, and MSAs. (Providing these information returns after August, 31, 2020, will be subject to IRS penalty, which will be calculated from September 1, 2020, through the date the information returns are actually provided.)
- Close of the 403(b) plan remedial amendment period remains at June 30, 2020, this guidance making official an earlier IRS website announcement.
- Adoption by a defined benefit pension plan of a pre-approved plan document, filing a request for a determination letter under the second six-year cycle, or certain other actions with respect to disqualifying provisions have a deadline of July 31, 2020.
Notice 2020-35 also extends to July 15, 2020 (not August 31), several items not previously granted extensions. These include the following.
- Application for a funding waiver by a defined benefit pension plan that is not a multi-employer (union) plan.
- Filing IRS Form 5330, Return of Excise Taxes Related to Employee Benefit Plans, and paying these excise taxes.
The U.S. House of Representatives passed by a 417-1 margin on Thursday, May 28, the Paycheck Protection Program Flexibility Act of 2020. This legislation would modify certain core terms of this Small Business Administration (SBA) emergency lending program. The Paycheck Protection Program (PPP) was created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law on March 27, 2020. Under the program, qualifying small businesses may apply for loans from the SBA to retain employees on their payrolls, and—especially attractive to business owners—the loans are forgiven if certain conditions are met.
As provided in the CARES Act, PPP loans taken to cover 8 weeks of program-eligible expenses can be forgiven (no repayment required). Although mortgage, rent, and other business expenses are included, to be eligible for forgiveness, 75 percent of a loan amount must—under current rules—be used for employee payroll expenses. Certain employee benefits, including defined contribution and defined benefit plan employer contributions, health insurance benefits (including premium payments), and certain employee leave benefits can be considered payroll expenses.
Today’s House-passed legislation would extend the 8-week period to 24 weeks, and would change the 75 percent payroll requirement to 60 percent.
The legislation would also relax certain loan forgiveness provisions in recognition that an employer may be unable to rehire some former employees or to find similarly qualified employees. Loan amounts not forgiven could be repaid over a period of 5 years instead of 2 years as under current rules.
Members of the U.S. Senate have been discussing a similar bill, one said to expand the 8-week period to 16, not 24 weeks. If the Senate is unable to pass its version of PPP revisions this week, which seems likely, its bill could be taken up when the Senate returns to Washington, D.C., next week.
The House of Representatives late Friday passed H.R. 6800, the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, providing additional aid to many who are adversely affected by the novel coronavirus (COVID-19) pandemic. The bill also contained non-COVID-19-related provisions considered likely to prove controversial in the Senate.
Unlike the Families First Coronavirus Response Act, and the Coronavirus Aid, Relief, and Economic Security (CARES) Act—both of which moved fairly rapidly through Congress—the HEROES Act has been called “dead on arrival” by Senate Majority Leader Mitch McConnell (R-KY), who—with Republican colleagues—envisions a much less comprehensive bill. Sen. McConnell has also expressed a desire to move slowly and gauge the effectiveness of earlier relief. Most expect no additional COVID-19-related legislation to be enacted before sometime in June.
As announced last week, the House bill contains provisions for the following.
- Continued financial assistance to unemployed workers
- Financial assistance to state, local, tribal, and territorial government entities
- Waiver of 2019 required minimum distributions (RMDs)
- Waiver of the 60-day and one-rollover-per-12-month rules for otherwise-required RMDs waived for 2019 and 2020
- Amendments to the Emergency Family and Medical Leave Expansion Act
- Relief for participants in health flexible spending arrangements (FSAs)
- Codifying the ability of employers to deduct certain expenses covered by loans that are forgiven under the SBA Paycheck Protection Program
- Providing money purchase pension plans the early distribution and loan relief that the CARES Act provided to other qualified retirement plans
- A new retirement “composite plan,” with features that include those of 401(k) and defined benefit (DB) pension plan
- Relief for multiemployer (collectively-bargained) DB pension plans
- Amortization relief for single employer DB pension plans
- Further funding relief (beyond that provided by the SECURE Act) to certain community newspaper DB plans
- Aid to certain federal agencies affected by the pandemic, including the Departments of Homeland Security, Interior, Health and Human Services, Labor, Transportation, Housing and Urban Development, and Education
- Enhanced Medicare and Medicaid benefits
- Medical supply chain enhancement
- Testing and reporting enhancement
- National strategic stockpile for pandemic response
- Bankruptcy protections for homeowners
- Certain student loan relief and protections
- Additional aid to veterans during the COVID-19 pandemic
- Federal election early and by-mail voting procedure
Published in today’s Federal Register are final regulations issued by the Department of Labor’s (DOL’s) Employee Benefits Security Administration (EBSA) that provide an additional safe harbor for ERISA retirement plans to deliver DOL-required disclosures by electronic means. A pre-publication version was released by EBSA on May 21. (The regulations’ preamble notes that the agency has chosen not to extend the guidance to welfare benefit plans at this time.)
These regulations become effective 60 days from today’s publication date. The EBSA noted in the guidance, however, that retirement plans may rely on these regulations immediately; no enforcement action will be taken against a plan for premature reliance due to the impact of the coronavirus (COVID-19) pandemic.
Scheduled for publication in the May 27th Federal Register are final regulations on default electronic delivery of retirement plan disclosures. These final regulations, issued by the Department of Labor’s Employee Benefits Security Administration (EBSA), provide an additional safe harbor that may enhance the ability of plan administrators and their service providers to deliver DOL-required disclosures to participants and beneficiaries of ERISA plans by electronic means.
An accompanying News Release and EBSA Fact Sheet cites the presidential Executive Order of August, 2018, which directed the agency—in part—“to focus on reducing the costs and burdens that retirement plan disclosures impose on employers and others.” Proposed regulations were issued in October 2019, and public comments solicited at that time contributed to shaping these final regulations.
This guidance officially becomes effective 60 days following publication in the Federal Register. But the EBSA Fact Sheet notes that retirement plans may rely on these regulations immediately; no enforcement action will be taken against a plan for such premature reliance due to the impact of the coronavirus (COVID-19) pandemic. (The regulations’ preamble notes that the agency has chosen not to extend the guidance to welfare benefit plans at this time.)
Following are selected observations from an initial review of the final regulations and EBSA Fact Sheet.
The new safe harbor
The electronic delivery safe harbor can be satisfied by either of two means.
- Website posting: A plan administrator is allowed to post covered documents (documents required to be furnished by ERISA Title 1 plans) on a website if appropriate notification of Internet availability is furnished to the electronic addresses of covered individuals.
- Email delivery: A plan administrator may send covered documents directly to the electronic addresses of covered individuals, with the covered documents either in the body of the email or as an attachment to the email.
First step to e-delivery is on paper
As in the proposed regulations, a plan administrator intending to deliver some, or all, covered documents electronically must first notify participants—in a paper communication—of this intention.
Paper option remains
Not unexpected, recipients can opt out of receiving covered documents electronically and receive them in paper form, without charge. However, plan administrators need not (but may) offer recipients a “pick and choose” option to receive some documents in paper form and some electronically; the plan can require that an opt-out be “global;” (all or nothing). Conversely, a plan that uses electronic means to deliver some covered documents need not use electronic means for all.
Combining notices of Internet document postings
Certain notices of Internet postings can be combined in a single annual notice of Internet availability (NOIA), including the following.
- Summary Plan Description (SPD)
- Documents that must be provided annually; (e.g., Summary Annual Report (SAR))
- Other documents authorized by the Secretary of Labor
- Notices required by the Internal Revenue Code if authorized by the Secretary of the Treasury; (e.g., automatic contribution arrangement (ACA) notice)
Flexibility in definition of “website”
The final regulations acknowledge the importance of including new and developing technologies in applying the guidance, as long as the safe harbor requirements can be met. Mobile applications qualify.
Informing participants of document posting
If covered documents are to be posted to a website, recipients must be able to receive a plan’s NOIA. An electronic address to which a NOIA is sent may be an email address. If it is a phone number, it must be capable of receiving written/text messages (plan administrators must confirm this). Delivery of a NOIA by voice message does not meet this requirement.
Availability of web-posted documents
A covered document posted to a plan’s website must remain there at least one year, or—if longer—until superseded (replaced by) an updated version of the same document.
Document description accompanying a NOIA
A NOIA alerting a participant to an Internet document posting need not include a separate description of the document, if the document’s name—included in the NOIA—would reasonably convey the nature of the document. If not (e.g., a blackout notice), a description of the document being posted to the Internet is required.
Readability
Detailed guidelines for readability in the proposed regulations (using the Flesch reading ease score) were removed, and are not included in the final regulations. The final regulations more simply require that communications under this guidance be “written in a manner calculated to be understood by the average plan participant.”
Accessing and Understanding
The plan administrator has no affirmative obligation under the final regulations to monitor whether covered individuals have visited a website to view posted information. Unaddressed—but noted, in reference to a recent ERISA court case—is the issue of whether a recipient has read, understood, and has “actual knowledge” of the information posted.
Special rule for severance from employment from plan sponsor
Procedures should be in place to ensure that a plan administrator will continue to have a valid electronic address to which notices can be provided after severance from employment.
Transition relief, prior guidance superseded
For an 18-month period following the effective date of these final regulations, retirement plans can also rely on prior guidance for the delivery of certain covered disclosures. This guidance includes Field Assistance Bulletin (FAB) 2006-003, FAB 2008-003 (Q&A 7), and Technical Release 2011-03R. Thereafter, the relevant portions of the prior guidance are superseded by the final regulations.
Reasonable procedures for compliance
These final regulations add “technical maintenance” of websites as a circumstance that warrants consideration of facts and circumstances, when—for a reasonable amount of time—disclosure documents may be unavailable to a recipient.
In addition to details provided in this announcement, a Washington Pulse is being prepared, and will be posted to FuturePlan News.
The Department of Labor’s Employee Benefits Security Administration (EBSA) has issued a pre-publication version of highly-anticipated final regulations on default electronic delivery of retirement plan disclosures. These regulations become effective 60 days following their publication in the Federal Register, currently scheduled for Wednesday, May 27.
Retirement plan administrators and service providers have been awaiting these final regulations since they were issued in proposed form in October 2019. This guidance is expected to enhance the ability of retirement plans and their service providers to deliver required disclosures to participants and beneficiaries by electronic means.
The House of Representatives late Friday passed H.R. 6800, the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, providing additional aid to many who are adversely affected by the novel coronavirus (COVID-19) pandemic. The bill also contained non-COVID-19-related provisions considered likely to prove controversial in the Senate.