IRS and PBGC Extend Deadlines Due to COVID-19

Practical Law Legal Update w-024-7331 (Approx. 10 pages)

IRS and PBGC Extend Deadlines Due to COVID-19

by Practical Law Employee Benefits & Executive Compensation

Notice 2020-23

The IRS provides the relief contained in Notice 2020-23 pursuant to the national emergency declaration regarding the COVID-19 pandemic signed by the President on March 13, 2020. Notice 2020-23 amplifies both:

Affected Taxpayers

Notice 2020-23 applies to "Affected Taxpayers." For purposes of the deadline extensions provided in Notice 2020-23, the Treasury Secretary has determined that Affected Taxpayers include:

Any person (as defined in Internal Revenue Code (Code) Section 7701(a)(1) (26 U.S.C. § 7701(a)(1))) with a federal tax payment, federal tax return, or other form filing obligation specified in Section III.A. of Notice 2020-23, which is due to be performed (originally or under a valid extension) on or after April 1, 2020, and before July 15, 2020. All of the persons who meet this part of the definition are deemed to be affected by the COVID-19 emergency.
Any person performing a time-sensitive action listed in either Treasury Regulation Section 301.7508A-1(c)(1)(iv) - (vi) (26 C.F.R. § 301.7508A-1(c)(1)(iv) - (vi)) or Revenue Procedure 2018-58 (Rev. Proc. 2018-58), which is due to be performed on or after April 1, 2020, and before July 15, 2020. The Notice refers to these actions as Specified Time-Sensitive Actions. Rev. Proc. 2018-58 contains a number of items that apply to employee benefit plans and certain equity compensation.

Deadline Postponement

Affected Taxpayers with Specified Time-Sensitive Actions have until July 15, 2020 to perform all Specified Time-Sensitive Actions (Notice 2020-23, Section III.C.). That means the applicable items in Rev. Proc. 2018-58 with a deadline of on or after April 1, 2020 and before July 15, 2020, now have a postponed deadline of July 15, 2020.

Federal tax returns and other form filing obligations that are due on or after April 1, 2020, and before July 15, 2020 (referred to in the Notice as Specified Forms), are now due on July 15, 2020. This is an automatic extension and filers do not have to call the IRS or formally request this relief. The automatic extension provided in the Notice applies to all schedules, returns, and other forms that are filed as attachments to the Specified Forms or are required to be filed by the due date of the Specified Forms.

The Notice also provides that taxpayers who need additional time to file may choose to file the appropriate extension form by July 15, 2020, to obtain an extension to file their return, but the extension date may not go beyond the original statutory or regulatory extension date.

Under Notice 2020-23, interest, penalties, or additional tax for failure to file the Specified Forms will not be counted for the period beginning April 1, 2020 and ending on July 14, 2020.

Retirement Plan Actions

If any of the Specified Time-Sensitive Actions listed in Rev. Proc. 2018-58 are due on or after April 1, 2020 and before July 15, 2020, they will be subject to the deadline extension provided in Notice 2020-23. Retirement plan related items include:

Qualified plan loan repayments. The CARES Act contains a different extension of plan loan repayments for individuals affected by COVID-19 (see Legal Update, CARES Act Contains Numerous Employee Benefit and Executive Compensation Provisions, Including Changes to COVID-19 Testing Mandate: Increase in Plan Loan Amounts and Repayment Period). The extension in Notice 2020-23 applies to all qualified retirement plan loan repayments during the specified timeframe. (Rev. Proc. 2018-58, Section 8, Item 1.)
Distributing excess deferrals under Code Section 402(g) by April 15, 2020 (26 U.S.C. § 402(g)) (see Practice Note, Contributions to a Defined Contribution Plan: Overview: Excess Deferrals). Note, this changes the previous position of the IRS as stated in Q&As released on March 24, 2020 (see Legal Update, IRS Q&As Address Applicability of Tax Filing Extension Under Notice 2020-18 to Retirement Plans and HSAs). (Rev. Proc. 2018-58, Section 8, Item 25.)
Form 5500 filings. The Form 5500 is due the last day of the seventh month after the end of the plan year (see Practice Note, Form 5500 for Employee Benefit Plans: Overview: Filing Deadlines). This deadline extension will not apply to calendar-year plans, which have a normal Form 5500 deadline of July 31, 2020. (Rev. Proc. 2018-58, Section 8, Item 40.)
Receiving required minimum distributions (RMDs). The CARES Act contains a different RMD waiver for defined contribution plans for the 2020 calendar year (see Legal Update, CARES Act Contains Numerous Employee Benefit and Executive Compensation Provisions, Including Changes to COVID-19 Testing Mandate: 2020 Required Minimum Distribution Waiver). (Rev. Proc. 2018-58, Section 8, Item 16.)
The 60-day deadline for completing rollovers to an eligible retirement plan or IRA (Rev. Proc. 2018-58, Section 8, Item 23).
Self-correcting certain significant failures under the Employee Plans Compliance Resolution System (EPCRS) (see Practice Notes, Correcting Qualified Plan Errors Under EPCRS and Common Qualification Errors and Corrections Under EPCRS) (Rev. Proc. 2018-58, Section 8, Item 42).
Distributing excess contributions under Code Section 401(k)(8) by highly compensated employees (26 U.S.C. § 401(k)(8)) (Rev. Proc. 2018-58, Section 8, Item 21).
Distributing excess aggregate contributions under Code Section 401(m)(6) (26 U.S.C. § 401(m)(6)) (Rev. Proc. 2018-58, Section 8, Item 22).
Contributions to qualified retirement plans, simplified employee pensions, or SIMPLE IRA plans under Code Section 404(a)(6) (26 U.S.C. § 404(a)(6)) (Rev. Proc. 2018-58, Section 8, Item 26).
Making substantially equal periodic payments to obtain the exception to the 10% early distribution penalty under Code Section 72(t)(2)(A)(iv) (26 U.S.C. § 72(t)(2)(A)(iv)) (Rev. Proc. 2018-58, Section 8, Item 2).

Health and Welfare Plan Actions

As in the retirement plans context, Notice 2020-23 permits the deadlines for certain Code-based health and welfare plan actions to be postponed because of the COVID-19 outbreak, including certain actions listed by cross-reference to Revenue Procedure 2018-58. Under the deadline relief, if a specified action is due to be performed on or after April 1, 2020, and before July 15, 2020, then a deadline of July 15, 2020, applies to the action.

This deadline relief applies to:

Certain actions regarding cafeteria plans (for example, the cash-out deadline for unused election vacation days) (see Practice Note, Cafeteria Plans).
Form 5500 filings. As a general rule, Form 5500 is due the last day of the seventh month after the end of the plan year (see Practice Note, Form 5500 for Employee Benefit Plans: Overview: Filing Deadlines).

For more information, see Practice Note, COVID-19 Compliance for Health and Welfare Plans.

HSA-Related Requirements

The deadline relief also applies to rollover contributions to health savings accounts (HSAs), which generally must be made by the 60th day after the day on which the individual receives a payment or distribution from an HSA (see Practice Note, Defined Contribution Health Plans: 60-Day Rollover Deadline May Be Postponed Due to Certain Events). If the 60-day period ends between April 1 and July 14, the rollover need not be completed until July 15. A similar rule applies regarding Archer MSAs (see Practice Note, Defined Contribution Health Plans: Archer Medical Savings Accounts (Archer MSAs).

In addition, the deadline relief applies to a rule under which HSA contribution information must be furnished to individuals (and Form 5498-SA filed with the IRS) by May 31 following the calendar year to which the information relates. A deadline of July 15 now applies.

Deadlines for CPEOs

The deadline relief applies to specified requirements involving certified professional employer organizations (CPEOs) (see Standard Document, PEO Client Service Agreement and Legal Update, Certified PEO Applications to Be Accepted Beginning July 1, 2016). Specified actions under Revenue Procedure 2018-58 in this regard include:

Certain bonding, financial review, reporting, and verification requirements for becoming and remaining a CPEO.
Periodic reporting requirements.

Equity Compensation Actions

Notice 2020-23 (by cross-reference to Revenue Procedure 2018-58) also permits the deadlines for certain Specified Time-Sensitive Actions related to equity compensation to be postponed because of the COVID-19 outbreak. Under the guidance, if a specified action is due to be performed on or after April 1, 2020, and before July 15, 2020, then individuals will have until July 15, 2020, to perform the action.

This deadline relief applies to:

Code Section 83(b) elections, which allow recipients of unvested property such as restricted stock to elect to be taxed at the time of grant rather than at vesting on the excess of the fair market value of the property on the grant date over the amount paid for the property, if any. Under normal circumstances, a Code Section 83(b) election must be filed with the IRS within 30 days of the grant date.
Code Section 83(i) elections, which allow certain private corporations to offer qualified employees the opportunity to elect to defer the recognition of income on illiquid company stock acquired through the exercise of stock options or settlement of restricted stock units for up to five years. Under normal circumstances, a qualified employee must file the election within 30 days after the date the employee's rights in the stock become either transferable or no longer subject to a substantial risk of forfeiture.

PBGC Relief

It is the PBGC's policy to grant disaster relief when, where, and for the same relief period that the IRS grants tax relief for taxpayers affected by a disaster (including filing extensions for the Form 5500 series) (see Legal Update, PBGC Changes How It Announces Disaster Relief).

Following the automatic extension provided to affected taxpayers by the IRS in Notice 2020-23, the PBGC has extended to July 15, 2020, the due date for premium payments, filings, or other actions that would have been due on or after April 1, 2020, and before July 15, 2020.

The extended due date does not apply to particularly important or time-sensitive filings on the "Exceptions List" on the PBGC's Disaster Relief webpage that may indicate a high risk of harm to pension plan participants or the insurance program, including:

Advance notices of reportable events and post-event notices of certain reportable events under ERISA Section 4043 (29 U.S.C. § 1343; see Practice Note, Reportable Events for Pension Plans Under ERISA Occurring On or After January 1, 2016).
Notices of large missed contributions under ERISA Section 303(k) (29 U.S.C. § 1083) (which are filed on PBGC Form 200; see Practice Note, Reportable Events for Pension Plans Under ERISA Occurring On or After January 1, 2016: PBGC Form 200).
Actions related to distress terminations for which the PBGC has issued a distribution notice (see Practice Note, Defined Benefit Plans: Distress and Involuntary Terminations).

However, plans that seek to make one of the filings on the Exceptions List may request individual extensions from the PBGC.

Practical Impact

Plan administrators, sponsors, and counsel should review the deadline extensions provided by the IRS and the PBGC and understand how they interact with the extensions already provided by the CARES Act. They should also make sure to communicate the revised deadlines to affected individuals (for example, recipients of restricted stock). The retirement plan loan repayment deadline postponement, as well as the 60-day rollover deadline postponement, are particularly relevant for retirement plan administrators. Practical Law will provide updates on any additional extensions that these agencies may provide.

IRS and PBGC Extend Deadlines Due to COVID-19 | Practical Law