CARES Act Provides Funding Relief for Single Employer Pension Plans

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With plan sponsors concerned about cash flow, the Coronavirus Aid, Relief and Economic Security (CARES) Act provides much needed relief by delaying the minimum required contributions for single employer defined benefit plans. The CARES Act delays the due date for any minimum required contributions otherwise due in 2020 until January 1, 2021 at which time, the 2020 minimum required contributions, plus interest, will be due.

This relief also provides plan sponsors with the option to use the plan’s funded status for the last plan year ending before January 1, 2020 for purposes of determining the funding-based benefit restrictions under Section 436 of the Internal Revenue Code for plan years that include calendar year 2020. This relief may allow participants to continue to receive a lump sum and other accelerated distribution options in 2020 and also may permit plan sponsors to avoid the restrictions on future benefit accruals, even if the plan’s funding status has significantly declined due to low interest rates, volatile equity markets and the impact of COVID-19.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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