Clarification on Delayed Participant Contributions and Loan Repayments Due to COVID-19
The Employee Benefits Security Administration (EBSA) issued a disaster relief notice during 2020 that gave relief to plans that had participant payments and withholdings that were not made within prescribed timeframes if those delays were solely attributable to the COVID-19 pandemic.
The relief period began on March 1, 2020 and will run until 60 days after the announced end of the COVID-19 National Emergency.
Under 29 CFR section 2510.3-102, amounts that a participant or beneficiary pay to an employer, or amounts withheld from the participant’s wages by an employer, for contribution or repayment of a participant loan to an employee pension benefit plan constitute plan assets.
Generally, these amounts need to be forwarded to the plan as soon as it is administratively feasible (which applies to large plans), meaning as soon as these amounts can be reasonably separated from the employer’s assets. These amounts must be forwarded to the plan no later than the 15th business day of the month following the month in which they were withheld by the employer, however the 15th business day of the month is not a safe harbor that large plans can default to. A large plan must apply the subjective principle “as soon as administratively feasible.”
Under the disaster relief notice, the Department of Labor will not take enforcement action with respect to a temporary delay in forwarding these payments if those delays are solely attributable to the COVID-19 outbreak. Employers must still operate under the “as soon as administratively feasible” time frame to act in the best interest of the participants.
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