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IRS Extends Additional Deadlines Due to COVID-19 in Notice 2020-35
Practical Law Legal Update w-025-7884 (Approx. 7 pages)
IRS Extends Additional Deadlines Due to COVID-19 in Notice 2020-35
by Practical Law Employee Benefits & Executive Compensation
| Published on 01 Jun 2020 • USA (National/Federal) |
The Internal Revenue Service (IRS) has issued Notice 2020-35, which postpones the deadlines for certain actions that are due to be performed on or after March 30, 2020, and before July 15, 2020, with respect to employee benefit plans because of the hardship caused by the COVID-19 pandemic. The Notice amplifies the relief provided in Notice 2020-23.
The IRS has issued Notice 2020-35, which postpones the deadlines for certain actions that are due to be performed on or after March 30, 2020, and before July 15, 2020, with respect to employee benefit plans because of hardship relating to the US outbreak of COVID-19, the disease that results from SARS-CoV-2.
(For a collection of COVID-19 resources, see Global Coronavirus Toolkit.)
Notice 2020-35
The IRS provides the relief contained in Notice 2020-35 pursuant to the national emergency declaration regarding the COVID-19 pandemic signed by the President on March 13, 2020 (26 U.S.C. § 7508A; see Article, COVID-19 and Qualified Disaster Relief Payments Under Code Section 139). Notice 2020-35:
- Modifies Revenue Procedure (Rev. Proc.) 2017-18, Rev. Proc. 2017-55, and Announcement 2018-05 (see Legal Updates, IRS Final Regulations, Revenue Procedure 2017-55, and Notice 2017-60 Prescribe Mortality Tables for Defined Benefit Plans and Provide Related Guidance and IRS Intends to Issue Opinion and Advisory Letters for Pre-Approved Defined Benefit Plans for the Second Six-Year Remedial Amendment Cycle).
- Amplifies Notice 2020-18, Notice 2020-20, and Notice 2020-23 (see Legal Updates, IRS Q&As Address Applicability of Tax Filing Extension Under Notice 2020-18 to Retirement Plans and HSAs, IRS Extends Gift and Generation-Skipping Transfer (GST) Tax Filing and Payment Deadline to July 15, 2020 Due to COVID-19 Pandemic, and IRS and PBGC Extend Deadlines Due to COVID-19).
Affected Taxpayers
As with Notice 2020-23, Notice 2020-35 applies to "Affected Taxpayers." However, the Notice 2020-35 definitions of "Affected Taxpayer" and "Specified Time-Sensitive Action" are different than the definitions of those terms under Notice 2020-23. Under Notice 2020-35, an "Affected Taxpayer" includes:
- For employment tax purposes, employers who perform a "Time-Sensitive Action" specified in the Notice.
- Employee benefit plans (including Code Section 403(b) plans, governmental Section 457(b) plans, simplified employee pension (SEP) plans, and savings incentive match plan for employees individual retirement accounts (SIMPLE IRAs)), plan sponsors, plan administrators, participants, beneficiaries, disqualified persons, or other persons who perform Time-Sensitive Actions specified in the Notice.
- Persons performing a Time-Sensitive Action specified in the Notice on behalf of a tax-exempt organization.
- Filers of Form 5498-SA (including health savings accounts (HSAs) and Archer medical savings accounts (Archer MSAs)), to the extent filing the form is a Time-Sensitive Action (see Practice Notes, Defined Contribution Health Plans and COVID-19 Compliance for Health and Welfare Plans: HSA and HDHP Compliance).
Deadline Postponement
Affected Taxpayers with Specified Time-Sensitive Actions (as defined under Notice 2020-35) have until July 15, 2020, to perform specified actions (as listed in Notice 2020-35, Section III.B) that are due to be performed on or after March 30, 2020, and before July 15, 2020, unless another date is specified in Notice 2020-35. The general set-aside period is slightly broader than the period under Notice 2020-23.
Retirement Plan Actions
Under Notice 2020-35, retirement plan related items that now have a July 15, 2020, deadline include:
- Application for a funding waiver for a single-employer defined benefit pension plan (26 U.S.C. § 412(c)).
- For multiemployer pension plans:
- certification of funded status and notice to interested parties of the certification;
- adoption of a funding improvement plan (FIP) or rehabilitation plan; and
- annual update of a FIP and its contribution schedules, or a rehabilitation plan and its contribution schedules, and the filing of those updates with a Form 5500.
- For cooperative and small employer charity pension (CSEC) plans:
- making required contributions for the plan year;
- making required quarterly installments;
- adopting a FIP; and
- certifying the plan's funded status.
- Implementing the corrective actions specified in a compliance statement issued under the Employee Plans Compliance Resolution System's (EPCRS) Voluntary Correction Program (VCP), including adopting any necessary corrective amendments (see Practice Note, Correcting Qualified Plan Errors Under EPCRS: Compliance Statement).
- Requesting approval to use a substitute mortality table (26 U.S.C. § 430(h)(3)(C)(v)(I)).
- Filing the Form 5330 (Return of Excise Taxes Related to Employee Benefit Plans).
Notice 2020-35 also extends the end of the initial remedial amendment cycle for Code Section 403(b) plans from March 31, 2020, to June 30, 2020 (see Practice Note, Code Section 403(b) Plans: Overview and Legal Update, IRS Extends the Initial Remedial Amendment Period for 403(b) Plans and the Remedial Amendment Cycle for Pre-Approved Defined Benefit Plans).
Regarding pre-approved defined benefit plans, Notice 2020-35 extends until July 31, 2020, the deadline for:
- Adopting a pre-approved plan that was approved based on the 2012 Cumulative List (see Legal Update, IRS Releases 2012 Cumulative List of Changes in Plan Qualification Requirements).
- Submitting a determination letter application under the second six-year remedial amendment cycle.
- Actions required to address a disqualifying provision and that would otherwise have to be performed during the remedial amendment period originally scheduled to end on April 30, 2020.
HSAs and Archer MSAs
Notice 2020-35 extends the deadline for filing Form 5498-SA (HSA, Archer MSA, or Medicare Advantage MSA Information) until August 31, 2020 (see Practice Note, Defined Contribution Health Plans: Overview: Health Savings Accounts (HSAs) and Archer Medical Savings Accounts (Archer MSAs)). The period beginning on the form's original due date and ending on August 31, 2020, will be disregarded in calculating penalties for failures to file the form.
Relief for CPEOs
The IRS's guidance also waives the requirement that certified professional employer organizations (CPEOs) file certain employment tax returns electronically. Accordingly, CPEOs may file a paper:
- Form 941 (Employer's Quarterly Federal Tax Return) for the second, third, and fourth quarters of 2020.
- Form 943 (Employer's Annual Federal Tax Return for Agricultural Employees) for calendar year 2020.
Correcting Employment Tax Errors
Under Notice 2020-35, making interest-free adjustments under Code Section 6205 or 6413 to correct errors in employment taxes, including Federal Insurance Contributions Act (FICA) tax, also qualifies as a Time-Sensitive Action subject to the July 15, 2020, deadline (26 U.S.C. §§ 6205 and 6413; see Practice Note, Payroll (FICA) Taxes).
Practical Implications
Plan administrators, sponsors, and counsel should review the extensions provided and understand how they interact with other extensions already provided. In addition, Notice 2020-35 provides that for listed Time-Sensitive Actions under the Code with parallel provisions in ERISA, the guidance's relief also applies for purposes of the ERISA provisions.
Practical Law will provide updates on any additional extensions that the IRS may provide.