During the economic downturn associated with the COVID-19 pandemic, some 401(k) plan sponsors may be considering a mid-year reduction or suspension of matching contributions or nonelective contributions to their 401(k) plans as a cost-saving measure. Generally, whether the matching or nonelective contributions may be reduced or suspended will depend on the specific terms of the plan. In addition, in the case of  a plan that is intended to be a safe harbor plan under sections 401(k) or 401(m) of the Internal Revenue Code of 1986 as amended (the “Code”), the Code imposes particularly restrictive rules limiting mid-year changes. The following summarizes steps that a plan sponsor must take to reduce or suspend matching or nonelective contributions to its safe harbor plan during the plan year without jeopardizing the plan’s tax-qualified status.

In order for a plan to be a basic safe harbor plan under sections 401(k)(12) or 401(m)(11) of the Code or a qualified automatic contribution safe harbor plan under sections 401(k)(13) or 401(m)(12) of the Code, an employer must make a specified level of matching contributions, or alternatively, a specified level of nonelective contributions, to the plan. In addition, an employer must provide in advance of the plan year a “safe harbor notice” of the matching contributions or nonelective contributions, as applicable (but see SECURE Act change below), and the plan must satisfy certain vesting requirements. If these requirements are satisfied, the plan will be treated as satisfying the actual deferral percentage (ADP) and, with respect to matching contributions, the actual contribution percentage (ACP) nondiscrimination tests that normally apply to 401(k) plans. (We refer hereinafter to a 401(k) plan that is intended to satisfy the safe harbor rules as a “safe harbor plan,” and the matching contributions or nonelective contributions used to meet the safe harbor requirements as “safe harbor contributions.”)


Continue Reading How to Reduce or Suspend Matching or Nonelective Contributions Under a Safe Harbor 401(K) Plan

Over the last week, the Department of Labor, together with the Treasury Department, released several key pieces of guidance temporarily relieving deadlines for participants and beneficiaries in health, disability, other welfare and pension plans, and liberalizing enforcement policies and deadlines applicable to plans and plan sponsors.  The guidance is likely to be welcome relief for

The Hong Kong Government announced on 8 April 2020 the second round of Anti-epidemic Fund measures which included an HK$80 billion Employment Support Scheme (“ESS”) to help employers retain employees and avoid redundancies. Details of the ESS are outlined in our Legal Update on MayerBrown.com.

***

If you wish to receive periodic updates on

On 8 April 2020, the Government announced an HK$80 billion Employment Support Scheme (“ESS“) to help employers retain employees and avoid redundancies. As discussed in Mayer Brown’s Update “COVID-19 – Government Support for Employers in Hong Kong” from yesterday, one of the key terms upon which the Government will provide wage

The majority of the benefit and compensation provisions of the Coronavirus Aid Relief and Economic Security Act (the “CARES Act”) provide critical relief to companies and rank and file employees in light of the COVID-19 pandemic (see our previous blog posts on the impact of the CARES Act on health and welfare plans, on the impact on retirement plans, and on executive compensation, employment, leave and payroll tax issues). In addition to supporting their general employee population, most company boards of directors (or applicable board committees) are also grappling with the unique issues relating to compensation and benefits of their executive employees at an uncertain time when such employees are critical to the company’s ability to weather the storm. The following is a summary of key executive compensation issues that boards and executives may want to consider during these trying times.

Continue Reading Key Issues for Companies to Consider Regarding the Impact of COVID-19 On Executive Compensation

In the third and final of a series, our employment and benefits teams take an in depth look at the provisions of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act” or the “Act”) affecting employment, compensation, payroll taxes and paid leave. For a description of changes affecting health and welfare plans, see here, and for a description of changes affecting retirement plans, see here.

Continue Reading CARES ACT – Employment, Compensation, Payroll Tax and Paid Leave Provisions

In the second of a series, our benefits team takes an in depth look at the provisions of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act” or the “Act”) affecting retirement plans. For a description of changes affecting health and welfare plans, see our prior post.

Retirement Plans

Tax-Favored Coronavirus-Related Distributions

The CARES Act introduces a new category of withdrawals, referred to as “coronavirus-related distributions,” under retirement plans. These withdrawals are eligible for beneficial tax treatment that is not available to withdrawals from retirement plans that do not satisfy the requirements of a coronavirus-related distribution.


Continue Reading CARES ACT – Changes for Retirement Plans

On March 27, 2020, President Trump signed the largest economic stimulus bill in US history: the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act provides resources to support our health care system in the fight against the COVID-19 pandemic, cash and other forms of relief for individual citizen; loans and other assistance to small businesses; and assistance for certain hard-hit industries. Many of the changes affect or have implications for employee benefit programs and other aspects of employee compensation. In our blog entry from March 27, we provided a high level summary of the legislation as it affects executive compensation, retirement and health and welfare plans, and employment taxes. In the first of a series, we look at the provisions affecting health and welfare plans in more depth.

Continue Reading CARES ACT – Changes for Health and Welfare Plans

The Pensions Regulator (“tPR”) has released guidance on issues which occupational pension schemes may face as a result of disruption caused by COVID-19. To read the full update, please visit our website.

If you wish to receive periodic updates on this or other topics related to the pandemic, you can be added to our

In Notice 2020-18 (PDF), the US Treasury Department and the Internal Revenue Service (IRS) announced special Federal income tax return filing and payment relief in response to the ongoing Coronavirus Disease 2019 (COVID-19) emergency.  The IRS has now published Frequently Asked Questions providing additional information on the relief, some of which is relevant to employer-sponsored retirement plans, Individual Retirement Accounts (IRAs) and Health Savings Accounts (HSAs).

Continue Reading US IRS FAQs Under Notice 2020-18 Have Provided Insight into Qualified Plan Deadlines