In August 2020 we reviewed contribution timing for 2020 in the context of CARES Act relief providing that the due date for any ERISA-required 2020 defined benefit plan minimum contribution is delayed to January 1, 2021.
Briefly: The IRS released guidance (Notice 2020-61, August 6, 2020) clarifying that the extended CARES Act contribution deadline applied to both minimum and “excess” contributions – a critical issue in the calculation of PBGC variable-rate premiums. The extension did not, however, apply to the contribution due date for tax deduction. That date remains the tax return due date (with extensions) – for 2019 for calendar year C Corporation taxpayers, generally October 15, 2020 (if extended). Further, Notice 2020-61 did not extend the due date for filing Form 5500. That date remains (for calendar year plans) July 31, 2020 and may generally be extended another two-and-one-half months, to October 15, 2020.
With that guidance and previously issued PBGC FAQs, it was generally assumed that, for purposes of calculating 2020 Pension Benefit Guaranty Corporation variable-rate premiums, contributions had to be made by October 15, 2020, the 2020 variable-rate premium filing due date.
On September 21, 2020, however, PBGC announced that it intends to change this rule to allow DB sponsors to make contributions through January 1, 2021, that may be counted as plan assets for purposes of the 2020 variable-rate premium calculation. With respect to contributions made after October 15, 2020, this will generally require an amended premium filing and a refund of any premium overpayment.
For sponsors, PBGC’s new guidance is very good news, giving them extra time to make contributions that may reduce PBGC variable-rate premiums. We note that Notice 2020-61 generally requires an amendment to the Form 5500 for post-filing contributions that are counted as contributions for that plan year.
For more detail on these issues see our articles linked above.
We will continue to follow this issue.