Client Alert: COVID-19 Considerations For Your Company’s 401(k) & Other Tax-Qualified Retirement Plans
- Review our In-Depth: COVID-19 Retirement Q&A.
- Be prepared for participant requests related to elective deferrals, loan repayment, and eligible distributions.
- Review plan documents and policies for any necessary or desired amendments.
- Stay updated on pending federal legislation and forthcoming regulatory provisions.
Employers are facing a number of considerations related to the impact of COVID-19 (coronavirus) on company-sponsored 401(k) and other qualified plans. Below are a number of frequently asked questions and answers. Click here to review each Q&A in more detail: https://www.bfkn.com/in-depth-covid-19-retirement.
- Q: Has Congress altered any tax-qualified retirement plan rules in response to COVID-19?
- A: Yes. On March 27, 2020, Congress passed and the President signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).
- Q: May participants take a hardship withdrawal specifically because of the COVID-19 pandemic?
- A: Depending on the participant’s home state, although a hardship withdrawal may be unnecessary in light of the CARES Act provisions discussed above.
- Q: How can participants modify or terminate existing elective deferral elections?
- A: Follow the regular procedures set forth in the plan document and summary plan description. Plan sponsors may want to consider amending the plan if current provisions are not flexible enough to permit modification or termination of existing deferral elections.
- Q: May participants pause participant loan repayments?
- A: Yes, in certain circumstances and depending on plan terms.
- Q: May the plan be amended to allow loans or hardship withdrawals?
- A: Yes, although employers should be aware that making hardship withdrawals available creates a protected benefit that cannot be eliminated in the future except with respect to future contributions.
- Q: May matching or other employer contributions be reduced or suspended?
- A: Possibly, depending on the type of employer contribution.
- Q: Will furloughs or layoffs cause accelerated vesting of unvested contribution accounts?
- A: Possibly, if the layoff or furlough qualifies as a partial plan termination.
- Q: When is plan amendment necessary?
- A: If the procedures subject to modification are set forth in the plan document, a plan amendment is required.
We Can Help You
We have been on the forefront of dealing with COVID-19 for our clients. Please contact us if you would like to discuss any of these issues, or if we can otherwise be of assistance.
We recommend you evaluate the following pandemic-related business and legal considerations that we have been discussing with our clients: