The CARES Act (the “Act”) has been around for just over 3 months, providing much needed relief for retirement plan participants as they and their employers continue to navigate the pandemic. While this is good news for all involved, the provisions of the Act also create an opportunity for plan sponsors to evaluate the impact on their system of internal controls as they relate to the plan itself.
Here are some considerations to take into account:Participant loans
- The Act expanded the maximum loan amount from $50,000 to $100,000.
- What communications have been made to plan participants advising them of this increased availability?
- The Act allows participants who take loans to forego repayment on the loans until 2021
- What controls are in place with your payroll system to ensure a timely and accurate inception of loan repayments once the grace period expires?
Required Minimum Distributions (RMDs)- The Act suspended RMDs for 2020, for those over age 70 ½ (if born prior to 7/1/1949) and age 72 (if born after 7/1/1949).
- What controls are in place to ensure proper suspension of the RMDs?
- What processes does your third-party administrator (TPA) have in place to communicate this to affected participants?
- Have you reviewed participant census data to ensure accurate reporting of various demographic dates to ensure the right people are identified?
- What processes does your TPA have to ensure this money is placed in the proper bucket if it is returned to the Plan?
- How does the TPA ensure that this will not trigger the treatment of these distributions as a taxable event when tax forms are generated in 2021?
Eligibility and Participation
- While the Act did not specifically make any changes to eligibility or participation requirements, it is important to consider the effects of a changing employment market on your plan’s operations:
- How are you tracking employee hours, especially those who may be on furlough or reduced hours to ensure the eligibility provisions of the plan are properly followed?
- Is current census data accurate? Should a review be performed of the data to ensure this?
- Have you implemented any new payroll codes as a result of employment changes at your organization? How have these been reviewed to ensure they are being properly included or excluded for employee deferrals to meet the plan’s definition of eligible compensation?
Meaden & Moore continues to monitor all recent developments related to COVID-19 and its impact on your business and your employee benefit plans. Stay tuned to the M&M blog for future content to help keep you informed and prepared. If you have any questions, please contact us.