Defined Benefit Plan Provisions
Does the required minimum distributions relief apply to DB plans?
The required minimum distribution relief included within the CARES Act does NOT apply to DB plans.
Does the coronavirus-related distribution provision apply to DB plans?
It isn’t altogether clear. DB plans are ‘eligible retirement plans’ as referenced within the CARES Act but the design and intent of the coronavirus-related distribution provisions more closely align with a DC plan design. Aside from hybrid plans (cash balance or pension equity plans), DB plans generally don’t allow a distribution of vested accrued benefits at any time after separation from service; a participant must meet the plan’s early retirement eligibility to take payment early. In the absence of agency guidance, the legal employee benefits community appears to be interpreting the Act’s optional COVID-19 distribution provision as applying only to DC plans. However, retirement plan sponsors should consult their legal counsel.
Is there an extension for the Annual Funding Notice deadline?
As of April 1, 2020, 2:30 pm Central, the Department of Labor (DOL) has not issued an extension to the Annual Funding Notice deadline. The deadline is 120 days after the plan year end. For calendar year plan years, the 2020 deadline is April 29 (due to leap year). The CARES Act includes a provision expanding the conditions under which the DOL can postpone the deadline to include a public health emergency.
What is the single-employer pension plan funding relief?
Minimum required contributions for 2020 for single-employer pension plans are delayed until January 1, 2021. Interest accrues from when each contribution was originally due until the payment date, using the interest rate in effect for the plan year which includes the payment date.
What is the relief regarding benefit restriction status?
Single-employer plans can use the adjusted funding target attainment percentage (AFTAP) as of the last day of the plan year that ended prior to January 1, 2020 as the AFTAP for plan years which include the calendar year 2020.
Visit Alight’s COVID-19 Employer Updates page regularly for new information and developments to help employers navigate during this uncertain time.