Can I reduce, suspend or eliminate my employer contribution for the year?
It depends on whether your plan document requires mandatory contributions to be made or whether the plan document allows for discretionary contributions. Generally, discretionary contributions can be stopped or suspended at the employer’s discretion; however, mandatory contributions such as safe harbor match and safe harbor non-elective contributions have special rules for stopping or suspending them mid-year.
Can my employees suspend or reduce their deferral contributions for the year?
Most plans have Administrative Procedures written into the plan document which dictate how often employees can change their deferral elections and most plans allow an employee to stop deferral contributions at any time. You will want to document your employee’s change in deferral election to keep with your permanent plan files. You can also generally change your Administrative Procedures at any time to allow for more frequent deferral election changes as long as you provide notice to your plan participants of the change.
Do I count sick leave pay for retirement plan purposes?
The answer depends on your plan’s specific definition of compensation. Generally, sick pay is counted for plan purposes unless it is paid through an insurance company and not directly by the employer or an employer’s agent. When counted for plan purposes you would withhold each participant’s elective deferrals from that pay unless your plan allows for special deferral elections on irregular pay and the participant has made such special election.
Do I have to continue to meet the Department of Labor payroll deposit timing rules that apply with respect to employee deferrals and loan repayments?
Yes. Unless there is specific relief, the Department of Labor regulations remain in place, requiring plans with fewer than 100 participants to deposit employee deferral and loan repayments no later than 7 business days after the payroll date and large plans to deposit deferrals and loan repayments as soon as possible. You will want to thoroughly document the situation in case of audit.
Are employees allowed to suspend their retirement plan loan payments during this time?
Under normal loan rules, employees who are on a bona fide leave of absence can suspend their loan repayments for up to one year provided the loan does not go past the original 5 year maximum maturity date. Interest continues to accrue while payments are suspended. There may be forthcoming legislation that allows any participant affected by the Coronavirus to take advantage of suspending loan payments even if not officially on leave.
I have had to lay off several employees, now what?
Generally, a layoff is considered a termination of employment and terminated employees have access to distributions from their retirement plan. In addition, if you lay off more than 20% of your workforce a partial plan termination may occur where all affected participants must become 100% vested in their retirement accounts.
What happens if I rehire back an employee I had to lay off?
Generally, if the eligible employee had already satisfied the eligibility requirements, the employee must re-enter the plan on the later of (1) the entry date on which they would have entered the Plan had there been no severance of employment or (2) the date of their re-employment unless the break in service rules apply.
Do my active participants have access to their retirement plan account during this time of crisis?
Your plan may already allow for loans and/or hardship and in-service withdrawals to your plan participants. Forthcoming regulations may also relax the hardship reasons and loan limits due to the Coronavirus.
I no longer can support a retirement plan for my employees, can I terminate my plan?
Once you terminate a plan, you generally cannot start up another plan for another 12 months. Terminating a plan requires a plan amendment, all participants become 100% vested, and you generally still must contribute required contributions through the date of termination. Safe Harbor 401(k) plans also have specific requirements which may include a 30 days’ notice prior to terminating.
Washington Financial Group, HUB International and LPL Financial does not provide tax, accounting or legal advice, and information presented about tax considerations is not intended as tax advice and should not be relied upon for the purpose of avoiding any tax penalties. Clients should review any planned financial transactions or arrangements that may have tax, accounting or legal implications with their personal professional advisors.
Securities offered through LPL Financial, member FINRA & SIPC. Investment advice offered through Global Retirement Partners, LLC (GRP) a registered investment advisor. GRP, Washington Financial Group and Hub International are separate and unaffiliated with LPL Financial.