On June 11, 2021, the IRS issued its Final Regulations on the subject of the mandatory, minimum 60-day postponement of certain tax-related deadlines due to “federally declared disasters” under the Taxpayer Certainty and Disaster Tax Relief Act of 2019, passed as part of the Further Consolidated Appropriations Act of 2020 (the “Act”). The Final Regulations, which affect retirement plans (including 401(k) plans), are substantially unchanged from Proposed Regulations which were issued on January 13, 2021.
Background. Among many other provisions, the Act, which was signed into law on December 20, 2019 (and which also incorporated the SECURE Act – see our article entitled “Congress Finally Passes SECURE Act – The Most Sweeping Pension Legislation in Over a Decade is Now Law” added a mandatory 60-day minimum extension period for retirement plans (and, similarly, to plan sponsors, plan administrators, and to plan participants and their beneficiaries) for making plan contributions and rollovers.
Generally stated, the Act extends the deadline for performing certain tax-related acts (enumerated below) by a minimum of 60 days – or longer, at the discretion of the U.S. Secretary of Treasury — after the latest “incident date” in cases of “federally declared disasters,” as further explained in this article.
Since the enactment of the Act and the SECURE Act in late 2019, the IRS has issued a significant amount of official guidance interpreting and clarifying various provisions of the Act. These Final Regulations are the latest in this series of pronouncements.
DISCLAIMER: This article is intended as a general overview of provisions relating to 401(k) plans and is not intended to address all provisions of the Final Regulations, the Act, the SECURE Act, or those provisions of any of the foregoing not relating directly to 401(k) plans (such as provisions relating to individual retirement accounts (“IRAs”) or certain other “qualified individuals” as defined in the Final Regulations). As always, be sure to consult with your own ERISA attorney or other professional advisor for individualized advice with respect to your plan’s unique situation.
401(k) Plan Deadlines Affected. For purposes of the Act, the tax-related deadlines applicable to 401(k) plans that are subject to the mandatory, minimum 60-day postponement include the following:
- Making contributions to a qualified plan, including a 401(k) plan; and
- Completing 401(k) plan rollovers.
For these purposes, contributions to a 401(k) plan include all contributions made to the plan, both employer discretionary and non-discretionary contributions, along with all employee deferrals and any after-tax contributions (such as Roth contributions).
Plan rollovers are described as rollovers made of an “eligible rollover distribution” to a qualified plan, either in the form of a direct trustee-to-trustee transfer, or by means of an alternative transfer arrangement that is completed within the 60-day statutory period.
OBSERVATION: In the event of a “federally declared disaster” (see below), under the Act, the statutory 60-day deadline may be extended by a minimum of an additional 60 days, and may be extended for a longer period of time, at the discretion of the U.S. Secretary of Treasury, as further explained in “Length of Extension,” below.
Federally Declared Disaster, Defined. The Final Regulations clarify that the definition of “federally declared disaster” for purposes of deadline extensions includes both:
- A major disaster declared under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (“Stafford Act”); and
- An emergency declared under section 501 of the Stafford Act.
Generally stated, the Stafford Act is legislation that gives the U.S. President the power to declare a national emergency as a response to a national disaster.
Length of Extension. Under the Act, the tax-related deadline is extended by a minimum of 60 days, such 60-day period beginning on the earliest “incident date” for a qualifying disaster and ending 60 days after the latest “incident date” for the disaster. (See “EXAMPLE,” below.)
Notably, the extension period may be extended by a longer period, although the period may not exceed one year. The length of time is to be determined by the U.S. Secretary of Treasury, in his or her discretion. The decision as to the extension (including the length thereof) is usually announced in the form of an official IRS news release, or similar IRS pronouncement.
Incident Date. Neither the Act nor the Final Regulations explicitly define the term “Incident Date,” but the disaster declaration itself will generally include one or more incident dates. Accordingly, these would be the incident dates to be used for purposes of determining both the earliest incident date for a qualifying disaster and the latest incident date for such disaster.
EXAMPLE: Hurricane Edward batters the Southern U.S. for several days. In response to a FEMA pronouncement, the President declares a major disaster pursuant to the Stafford Act. The declaration specifies the earliest incident date for the affected counties as August 15 and the latest incident date (when the worst of the flooding ends) as August 19. In this case, under the Final Regulations, the deadline postponement for making 401(k) contributions and rollovers begins on August 15 and ends 60 days from August 19.
The Final Regulations provide that the extension generally will not apply where there is no stated incident date in the declaration.
Treasury Secretary Discretion Is Required. Importantly, the Final Regulations state that, if the U.S. Secretary of the Treasury does not exercise his or her discretion to postpone a time-sensitive act, then the act cannot be postponed under the mandatory extension.
Effective Date: The Final Regulations are effective on and after June 11, 2021.
More Information on SECURE Act. For more information about the SECURE Act, see our articles entitled “How Will the SECURE Act Affect Me? Highlights of Some of the Top New Provisions Affecting 401(k) Plans (Part One)” and “How Will the SECURE Act Affect Me? Highlights of Some of the Top New Provisions Affecting 401(k) Plans (Part Two).”
The information and content contained in this blog post are for general informational purposes only, and does not, and is not intended to, constitute legal advice. As always, for specific questions concerning your 401(k) retirement plan, or for help in operating your plan during the current COVID-19 crisis, please consult your own ERISA attorney or professional advisor.