CARES Act Webinar and Q+A with an ERISA Attorney

As we collectively maneuver through the challenges of the COVID-19 pandemic, one thing is certain: employers are faced with some tough choices that will impact the company and its employees well into the future.

We have compiled comments, considerations, and resources on decisions you may encounter for your organization’s retirement plan. We will continue to update this page as the landscape is quickly changing. If you have any questions or need any support, please feel free to reach out to us or your local Pensionmark Advisor. We are here for you.

Compliance Considerations

Recent legislation, fiduciary obligations, and liability.

Improving Company Cash Flow And the Retirement Plan

Suspending employer contributions and retirement plan considerations with layoffs & furloughs.

Supporting My Employees

Plan amendments and employee communication.

COVID-19 and the Market

Tips for coping with market volatility and investment fundamentals.

Monetary Relief Outside of the Retirement Plan

IRS Tax relief and SBA loans.

Work from Home & Mental Health

Resources for WFH and coping with stress & anxiety.

Compliance Considerations & Legislation

Has Congress passed new legislation impacting retirement plans?

Yes, the CARES Act (Phase 3 of the COVID-19 Relief Package) went into law on April 27, 2020. We put together the following resources for you answering all your questions:

Prior to the CARES Act, Congress also passed the Families First Coronavirus Response Act (H.R.6201-116th Congress 2019-2020). This bill is focused on individuals impacted by job loss & job absence due to the virus and some relief for businesses. It includes Mandatory 2 weeks of paid sick leave (Emergency Paid Sick Leave Act – EPSLA) and family leave (Emergency Family and Medical Leave Expansion Act – EFMLEA) for employees in self-quarantine or those being treated for the virus, Employer tax credits for paid sick & family leave, and more.

Additional information:

We strongly recommend employers review the methods for claiming the tax credit with their fiduciary tax advisor.


During the crisis, what are my fiduciary obligations?

First, remember that your retirement plan’s fiduciaries still have legal responsibility for operating the plan in accordance with ERISA, even in the midst of a crisis; this includes but is not limited to acting in the best interest of the participants,  providing timely participant notices, depositing employee deferrals as soon as possible, documenting any decisions as it relates to the plan, and so forth.

You should also reach out to your plan advisor, legal counsel, and CPA because there are financial, legal and tax-related considerations involved which can make a difference in how you should approach these decisions.

Additional Information: McDermott Will & Emery – COVID-19 FAQs For Employee Benefits & Executive Compensation


Are plan sponsors liable for investment losses associated with the COVID-19 virus?

It depends.  Plan fiduciaries are required under ERISA 404 to be prudent in the selection and monitoring of investments.  Merely incurring losses as a result of COVID-19 does not necessarily create liability; however, not continuing to monitor investments or limiting participants’ ability to change investments may incur liability.

That said, plans that allow participant direction but limit the frequency of changes may need to consider waiving the frequency limitations so that participants are not limited from moving assets in their account.

Additionally, plans that are considering fund line-up changes should consider whether the current market is appropriate to continue a black-out period or start a new black-out period which may constitute a fiduciary breach.

Particular attention should be given to investments in stable value funds or group annuity contracts. As to the former, the status of the funds should be monitored as well as any wrap insurance protection in light of decreasing interest rates.

As to the latter, be cognizant of any restrictions on withdrawals and additional fees that may be imposed in the event of a large volume of withdrawals.

Sponsors should also inquire whether their recordkeeper has adapted to the issues created by COVID-19, such as requiring employees to work remotely, to assure that plan services will not be affected.


Improving Company Cash Flow Using the Retirement Plan

What are the retirement plan considerations when it comes to staff reduction or placing staff on furlough?

Sending employees home is hard. How you do it has a direct impact on them and on the plan, and it may depend on whether or not you expect to bring employees back when the crisis has passed. If you do let people go, consider furloughs. Employees on furlough are still employees under the 401(k) plan, and therefore are not entitled to immediate distribution of their plan accounts. If your plan allows hardship withdrawals or loans, employees cannot transfer the money into an IRA or another employer’s plan. Terminated employees, on the other hand, can receive an immediate plan distribution, which they can keep as a taxable distribution, or transfer to another qualified plan.

However, if you terminate a large number of employees (generally 20% or more), it could trigger a partial plan termination (IRS)—in which case terminated employees must become fully vested in their employer contribution accounts. This includes those that leave voluntarily, but not furloughed employees.

Furloughed employees do not count toward a Partial plan termination, the trigger point is a termination status under the Plan, which subsequently qualifies the employee to access their account through the distribution options available due to separation of service (subject to the Plan document).

Additional resources:


How do we go about suspending our employer contributions?

The current economic landscape has driven plan sponsors to consider suspending their employer match. While this is never something that an organization wants to do, it may be something they need to do in the short-term. The rules and regulations around suspending a match differ depending on the type of employer match.

Safe Harbor Match:

Employers can reduce or suspend either safe harbor match or nonelective contributions (as applicable) mid-year when all of the following conditions are met:

  • Either of the following conditions apply:
    • The employer is operating at an economic loss.
    • The safe harbor notice provided before the start of the plan year includes a statement that the employer may reduce or suspend contributions mid-year.
  • A supplemental notice is distributed to eligible employees at least 30 days before the effective date of the reduction or suspension.
  • Eligible employees have a reasonable opportunity to change their deferral election before the reduction or suspension occurs.
  • The 401(k) plan is ADP/ACP tested for the full plan year in which the reduction or suspension occurs using the current year testing method.

Check out our Q+A for more information specifically about Safe Harbor 401(k) Plans.

Additional resources: IRS – Mid-year Changes to Safe Harbor 401(k) Plans and Notices; IRS Notice 2016-16

Fixed Employer Match:

Plans with a stated fixed match or employer contribution need to be amended in order to suspend the contribution and contributions must be made until the effective date of the amendment.

Formal advance participant notice is not required but encouraged to provide adequate time for participants to make deferral changes before the changes take effect.

Discretionary Employer Match:

Plans with discretionary employer or nonelective contributions can be suspended at any time. Since a plan amendment is not required, neither is a formal participant notice. However, it is also best practice to communicate this change with participants to allow time for any employee deferral changes.

As always, we recommend you seek legal counsel to assist in your decision-making process and work with your recordkeepers to determine what steps are needed for you to execute any changes you may need to make to your retirement plan.

We recommend you speak to your legal counsel and service providers before making any changes. As always document everything.


What if I want to terminate the plan?

While quick action may be necessary in our current circumstances, it’s usually best to take a considered approach. If you’re thinking about terminating the plan and distributing assets, you won’t be allowed to reinstate the plan within 12 months if you later change your mind. That’s another reason to take a breath, gather guidance and think things through before you act. Things may look very different in six months, and you will be glad that you proceeded in a thoughtful way.


Supporting my employees

Amendments to the plan

The CARES Act contains provisions for Coronavirus Related Distributions and plan loans. To help participants who may be facing financial difficulty, sponsors could amend their plans to offer loans and/or hardship distributions, if the plan does not currently permit them. Plan sponsors can contact their service providers to determine how to amend the plan properly.

Plan loans and hardship withdrawals come with unique compliance requirements. Any changes to requirements due to COVID-19 legislation or regulation will need to be understood, implemented properly and monitored.

Plan loans and hardship withdrawals come with unique compliance requirements. Any changes to requirements due to COVID-19 legislation or regulation will need to be understood, implemented properly and monitored.

Plan sponsors may wish to take the following actions:

  • Review their procedures for approving loans and hardship distributions to see if there are ways to streamline without sacrificing compliance;
  • Make sure there is clear understanding between the sponsor, the TPA, and the recordkeeper regarding roles and responsibilities of each for these transactions. Document those procedures in writing to streamline operations and in the event of questions later;
  • Although it may be tempting to do so to help participants, sponsors should not approve loans or hardship withdrawals that do not conform to the plan terms and to the documented procedures outlined among the parties;
  • For plan loans, sponsors should understand their role, if any, in making sure plan loans are repaid timely.

Failure to administer hardship withdrawals and plan loans can create adverse tax consequences for the plan sponsor, plan administrator and/or participants.  Having a clear understanding of the procedures now not only promote compliance today but will also better position sponsors to comply with any new guidance that may come from IRS, DOL and/or legislation from Congress.


Employee communication

Getting required notices to employees is more challenging now with so many people working offsite (or not at all). Even so, the notice requirements have not been suspended as of this writing. Make sure to distribute all required plan notices on schedule, whether that’s by mail or electronically. Consult with your recordkeeper or TPA for this.

Additionally, it may be prudent for Plan Sponsors to create communication to participants related to the retirement plan and remind participants of its purpose. The account should be a last resort rather than an ATM.

We will continue our Financial Wellness Program including market updates, webinars, newsletters, and our Financial Wellness Call Center. It is important employees are educated on basic savings and investing fundamentals now more than ever to help them navigate through financial uncertainty and market volatility.

Additional Resources: Financial Wellness Center


COVID-19 and the Market

We will be hosting a weekly COVID-19 recap call after Friday market-close at 1:30 PM PT/4:30 PM ET. Please see our upcoming webinars page for more info.

Our other resources on market volatility can be found here:


Monetary Employer Relief Outside of the Retirement Plan

IRS Coronavirus Tax Relief & Resources

IRS section of the website focused on steps to help taxpayers and businesses affected by COVID-19.


Small Business Association Loans

Payroll Protection Program Loans

The Paycheck Protection Program (PPP) is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.

The SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, and/or utilities. Lenders may begin processing loan applications as soon as April 3, 2020. The Paycheck Protection Program will be available through June 30, 2020.


Updates to PPP since original CARES Act:

[May 19, 2020]SBA Releases PPP Loan Forgiveness Application

The release of the application now gives us the guidance to understand and calculate how much of the loan will be forgiven. Just released, this 11-page application and instructions provide the much needed direction. The four part application includes the calculation form, PPP Schedule A and its corresponding worksheet, and an optional demographic information form. More information here: [Source Benefitmark, May 19, 2020] Paycheck Protection Program (PPP) – Loan Forgiveness Application

[June 5, 2020] President Trump is expected to sign the Paycheck Protection Program Flexibility Act of 2020 to give borrowers more flexibility when it comes to Paycheck Protection Program (PPP) loan forgiveness.  The new law will take effect immediately upon enactment and apply as if they were part of the original PPP provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

The measure gives existing and new PPP borrowers additional options and protections regarding loan repayment and forgiveness. Some of the key changes include:

  • Changing the timeframe to spend funds for loan forgiveness purposes from eight weeks to 24 weeks after loan origination or until December 31, 2020, for new borrowers;
  • Giving existing borrowers the option to extend their window to spend funds on qualified payroll and non-payroll expenses for forgiveness purposes from eight weeks to 24 weeks;
  • Reducing the percentage of loan funds a borrower must spend on qualified payroll expenses to obtain loan forgiveness from 75 percent to 60 percent. However, the original PPP rules allowed partial forgiveness if a borrower did not meet the 75 percent standard. The new law changes that If a borrower does not reach the lower 60 percent threshold, now their entire loan is ineligible for forgiveness;
  • Extending the maximum loan repayment timeframe from two to five years, while maintaining the one percent interest rate;
  • Allowing borrowers until December 31, 2020, to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness;
    Permitting loan recipients to exclude position(s) from their full-time employee count for forgiveness purposes if they either: (1) cannot find a qualified replacement employee, or (2) cannot restore their business to its economic status as of February 15, 2020, due to the impact of COVID-19; and
  • Allowing PPP loan recipients to delay payment of their payroll taxes over the next two years like other businesses. Previously, the CARES Act prohibited that for PPP recipients.

We expect the Small Business Administration will issue new regulations to implement these legislative changes soon.

[Source: Benefitmark, June 5, 2020]

Economic Injury Disaster Loan Emergency Advance 

This loan advance will provide up to $10,000 of economic relief to businesses that are currently experiencing temporary difficulties.

Source & Additional Information:

SBA Express Bridge Loans

Enables small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000 quickly.

Source & Additional Information:

SBA Debt Relief

The SBA is providing a financial reprieve to small businesses during the COVID-19 pandemic.

Source & Additional Information:


Work from Home & Mental Health

Work from Home Tips


Most popular tips include keeping up with your morning routine, take breaks, create boundaries between work and leisure, and communicate with coworkers (use webcam!). There are others, check out these resources.


Criminals are looking to exploit the spread of COVID-19 by conducting cyberattacks and hacking campaigns, especially in the form of phishing emails containing links or attachments that claim to contain important information about the virus.  Once opened, these infect the computer with malware that can be used to exploit the infected victim.

  • Some common requests made by phishers are:
    • Asking you to send information or money to them that might be out of the ordinary;
    • Receiving an odd attachment with a vague message that you should open it and respond immediately.
  • Phishers are focused on:
    • Getting you to open attachments;
    • Getting you to log on to a fake site;
    • Using words such as “urgent”, “immediately”, or “critical” to bypass your natural instinct to review things objectively.
  • If you receive an odd request do NOT reply to the email.  If it is a request to send money or divulge some other confidential information, contact the sender by telephone to confirm the request.


Mental Health Resources 

This period of isolation and fear may be difficult and stressful. Anxiety can become overwhelming and cause emotional distress in both adults and children.



This information is provided for informational purposes only and is not intended as legal, tax, or investment advice. We review each article to help ensure that it is related to the interests of our clients, but we do not endorse and disclaim any and all responsibility or liability for the accuracy, content, completeness, legality, or reliability of the material. All articles are copyrighted to their publishers.