The Coronavirus Aid, Relief and Economic Security Act (CARES Act) included a number of relief provisions intended to provide taxpayers a recess on due dates for certain items requiring cash payments. One of these provisions extended the due date for annual contribution to single-employer defined benefit plans to January 1, 2021.
IRS Notice 2020-82 has now clarified that it will treat a contribution to a single-employer defined benefit pension plan with an extended due date of January 1, 2021, as timely if it is made no later than January 4, 2021. The clarification modifies guidance previously provided in IRS Notice 2020-61.
The January 1 Due Date is Extended to the First Business Day
The CARES Act extension of the due date for contributions to January 1, 2021, is intended to allow employers sponsoring these plans to defer these payment obligations until calendar year 2021. However, financial institutions cannot transfer funds on the January 1, 2021, due date. Accordingly, the IRS will treat a contribution with an extended due date of January 1, 2021, as timely if made no later than January 4, 2021 (which is the first business day after January 1, 2021).
Note that for a contribution that is made by January 4, 2021, the amount of the minimum required contribution that is satisfied by the contribution (and the amount that may be added to the plan’s prefunding balance on account of any excess contribution) is determined by computing the applicable interest adjustment using the actual contribution date. If the plan year is a plan year for which the extended due date for minimum required contributions under the CARES Act applies, the deadline for a plan sponsor’s election to add to a prefunding balance or to use a prefunding balance or a funding standard carryover balance to offset the minimum required contribution for that plan year is extended to January 4, 2021.