Tag: COVID-19

Next COVID-19 Relief Phase Could Be Infrastructure

Posted on by info

In his public COVID-19 briefing on Tuesday, March 31, President Trump proposed a $2 billion infrastructure bill as the next piece of legislation to boost a post-pandemic U.S. economy. Although many lawmakers agree with the President, exactly what projects should be done and, more importantly, where the money will come from are points of contention.

The President proposed that the country should take advantage of historically low interest rates to borrow inexpensively to finance the infrastructure work. In a tweet he said, “With interest rates for the United States being at ZERO, this is the time to do our decades long-awaited Infrastructure Bill. It should be VERY BIG & BOLD, Two Trillion Dollars, and be focused solely on jobs and rebuilding the once great infrastructure of our Country! Phase 4.”

Rumors have the White House and Congress discussing ideas for a fourth round of stimulus due to the coronavirus outbreak. House Speaker Nancy Pelosi told reporters, “The President said during the campaign—and since—infrastructure was a priority for him. So that’s why we believe that in terms of recovery, that’s probably the most bipartisan path that we can take.”

The bill could be a boon to a construction industry currently under severe duress due to projects lost to the pandemic. According to the website The Hill, lawmakers “suggest the bill could include updates to public drinking water systems and hospital capacity, as well as upgrades to rural broadband in light of increased teleworking and online schooling during the pandemic. The upshot would include additional jobs at a time when unemployment filings are skyrocketing into the millions.”

The dictates indicate the nation is on a path to getting what has been rumored for years, an infrastructure support bill that will have bipartisan support. The Phase 4 bill could allow the U.S. to move forward with the work that everyone seems to agree we need, but no one has been willing to commit to. While we only have a tweet and comments to the media to confirm such a commitment, we seem to be moving in the direction of an infrastructure bill.

According to levelset.com, a website that advocates for construction businesses, the CARES Act, which was signed into law on March 27, contains elements of stimulus for the construction industry. In an April 2 posting, the site noted: “In particular, contractors who work on healthcare and public works projects could see a sharp uptick in jobs as infrastructure and hospital projects get off the ground quickly. In most states and cities so far, construction, in general, is considered an essential business, and projects are being allowed to continue even as governors issue stay-at-home orders.” The site points to $100 billion in emergency grants to hospitals that could be used for new construction projects to increase patient capacity, and another $150 million “to prevent, prepare for, and respond to coronavirus, domestically or internationally, including to modify or alter existing hospital, nursing home, and domiciliary facilities in State homes.”

Impact On U.S Retirement Plans Amid The Coronavirus

Posted on by info

Business leaders face an array of questions they need to answer and information they must analyze during the rapidly evolving response to the COVID-19 pandemic. 
 
While decisions about safety and business operations are obviously top priorities now, plan sponsors still must maintain compliance for their retirement plans. We are here to help you navigate these decisions. We address three of the most immediate questions that companies should be considering related to their retirement plans.
 

Will the Department of Labor and/or Treasury delay filing deadlines?

As of March 27, filing deadlines for retirement plan documents haven’t been delayed. While President Trump has declared a nationwide emergency, no subsequent guidance or relief has been issued by the Department of Labor (DOL) or the Treasury Department, which oversees the Internal Revenue Service (IRS).

Historically, departments have issued guidance and postponed deadlines during natural disasters, such as Hurricanes Irma and Maria in 2017. The IRS has broad authority to postpone certain deadlines after the president declares a disaster.

On March 16, the American Retirement Association (ARA) issued a letter asking the Treasury Department and DOL to push upcoming deadlines, including:

  • Extend Form 5500 deadlines to October 15 for calendar plan years (and similar extensions for non-calendar plan years)
  • 90-day extension for failed ADP or ACP testing and a similar extension for distributing excess contributions without the 10% tax penalty
  • 120-day extension for defined benefit plan reinstatement (currently April 30, 2020)
  • 90-day extension for 1099-R e-filings for employers (currently March 31, 2020)
  • Reasonable relief from required plan participant notices

Insight: We are closely monitoring the situation and will issue an alert to plan sponsors if filing deadlines change. Until then, plan sponsors should prepare to meet the current requirements.

Can plans reduce or eliminate matching contributions?

Reducing or eliminating matching contributions may seem like an immediate way to reduce cash outflows. But plan sponsors need to examine their plan documents to determine whether changes can be made, and the requirements related to such decisions.
 
In general, plans can reduce or eliminate discretionary non-elective and discretionary matching contributions without needing to amend plan documents. If a company decides to do this, however, it is important to have a thoughtful strategy for how to communicate these changes to employees.
 
Many plans operate as Safe Harbor 401(k) plans, which waive certain nondiscrimination testing requirements. The safe harbor match can be reduced or eliminated only if (1) the plan sponsor is operating at an economic loss, or (2) the annual safe harbor notice includes a statement that reserves the right to change the contribution schedule midyear. Satisfying one of these options still comes with a few strings attached: 

  • Participants must receive a notice 30 days before the effective date of the change and be given a reasonable timeframe to change their deferral amount
  • The plan loses its safe harbor status for the year and must undergo nondiscrimination ADP/ACP testing

Insight: Plan sponsors need to carefully consult their plan documents to understand their options for potentially reducing or eliminating matching contributions, as well as the process and timing requirements for such decisions. In terms of depositing employee contributions, plan sponsors should keep to their regular schedule; failure to do so may result in severe penalties.

Is cybersecurity still a high-priority consideration for plan sponsors?

Absolutely; retirement plan communications contain highly sensitive information. As more people are working from home, cyber criminals see this as an opportunity to access sensitive data through phishing emails and exploit gaps in remote technology systems. The Cybersecurity and Infrastructure Security Agency (CISA) issued a warningfor people to be aware of cyber scams related to COVID-19. CISA also offered recommendationsfor organizations with employees working offsite.

We’re Here to Help Plan sponsors face many weighty, complex decisions related to the COVID-19 pandemic, and we recognize that retirement plan oversight is just one small part of a company’s responsibilities. We are committed to keeping you updated on the rapidly evolving flow of news and regulations related to retirement plans.

The CARES Act and Your Mobility Program

Posted on by info

With the signing of the Coronavirus Aid, Relief, and Economic Security (CARES) Act by President Trump, millions of Americans are looking forward to receiving their stimulus checks. However, will your relocated employees actually receive one? The stimulus checks are to be delivered to individuals who meet certain income conditions and is phased-out for individuals over certain thresholds.

What We Know

The CARES Act provides eligible individuals with an advance refund check equal to $1,200 ($2,400 for joint filers) plus $500 per qualifying child. If adjusted gross income (AGI) exceeds $75,000 ($150,000 for joint filers), the advance refund check is reduced until it is completely phased-out for those with AGI of $99,000 ($198,000 for joint filers). An individual’s most recently filed return will determine eligibility for receiving the advance payment. In most cases, this will be the 2018 tax return, although for some it will be their 2019 tax return (if it has been filed and processed by the IRS).

The advance refund check is being provided in anticipation of an individual’s qualification for the related tax credit on his or her 2020 tax return. If an individual does not qualify for an advance payment due to the income level on their 2018 return (or 2019 return), but otherwise would qualify based on their 2020 income level, the credit will be applied on their 2020 tax return against their 2020 tax liability.

It should be noted that if an individual receives an advance refund check but whose 2020 income is higher than the thresholds, the advance would be forgiven and not need to be repaid. Therefore, relocations or assignments starting in 2020 should generally not impact an individual’s ability to benefit from the stimulus.

Impact to Your Mobile Population

For your employees who were relocated in or were on assignment during 2018 (or 2019) and had all of their relocation costs and assignment allowances included in their 2018 or 2019 Form W-2, their income was inflated for the year (compared to their “stay at home” income – any compensation they would have received had they not been relocated). As a result, these individuals are likely to receive a reduced advance refund check or possibly no advance refund check and will have to wait to file their 2020 tax return to see if they qualify for any additional amount. If their 2020 reportable income is higher than it would have been in 2018 or 2019, then the loss of the benefit related to the stimulus payment will be a permanent loss to the individual.

For example, consider a married employee with two qualifying dependent children, a base salary of $100,000, and bonus of $50,000 in tax year 2018. The individual moved from the U.S. to France during the year and had total relocation costs and allowances imputed into his or her W-2 of $75,000. Assuming his or her spouse is not employed and is not considering other personal income, this individual has reportable income for the year of $225,000. At this level of income, the individual is not eligible to receive an advance refund check, since income is above the $198,000 threshold for joint filers. However, if they had not been on assignment in 2018, income of only $150,000 would have been reported on the 2018 tax return. As a result, the individual would be eligible to receive an advance refund credit check of $3,400 ($2,400 for joint filers plus $500 for each qualifying dependent child).

The situation becomes even more complex for any inbound employees to the U.S. The CARES Act states that for an individual to be eligible for the advance payment refund check, they must have a valid identification number. In this instance, a valid identification number includes a Social Security Number, but does not include an Individual Taxpayer Identification Number (ITIN). It is a very common situation for inbound families where only the actual working spouse has a Social Security Number while the non-working spouse and children would have ITINs while the family is in the U.S. under temporary visas.

Company Considerations Since this stimulus payment is, in effect, an advance payment of a tax credit, a company must consider the cost impact to their mobile employee programs (domestic and/or international) like any other tax law change. Based on previous stimulus events and related reactions, it is likely that this stimulus event will create an increased cost to the company. In determining the effect to any impacted employee, the company should consider whether to wait until all information is known (i.e. upon filing of the 2020 tax return and related tax settlement calculation) or whether to review the mobility program population now.

If a company is waiting until the 2020 return is completed, special consideration should be made for employees who were involved in an active relocation or assignment in 2018 or 2019 but are not anticipated to be included on the company’s tax authorization list for 2020 tax return preparation.