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Compliance Newsletter June 2022

Physical Presence Relief Extended Again

The Internal Revenue Service (IRS) extended the temporary relief from the physical presence requirement outlined within Treasury Regulations when participant or spousal signatures must be witnessed by a plan representative or notary public. Relief is extended through December 31, 2022.

Background

Relief from the physical presence requirement was first issued through the end of 2020 and later extended through the end of June 2021. Highlighted below is the IRS guidance that has been deemed to satisfy the physical presence requirements during this relief period when a notary public or plan representative witnesses a retirement election remotely:

  • The notary public must use live audio-video technology that is consistent with applicable state law requirements.
  • The plan representative must use live audio-video technology and satisfy the following requirements:
    • The individual must present a valid photo ID during the live audio-video conference;
    • Audio-video technology must allow for direct interaction;
    • Documents must be faxed or transmitted to the plan representative the same day it was signed; and
    • The plan representative must transmit the fully signed and witnessed document along with an acknowledgement back to the individual.

Comments

The IRS and Department of the Treasury have received comments from numerous stakeholders both for and against granting permanent relief from the physical presence requirement. The agencies are currently reviewing the comments and any changes will be made through the regulatory process. As always, we will keep you informed of any changes that may impact your retirement plans.

Final Form 5500 Changes for MEPs and DB Plans

The U.S. Department of Labor (DOL) Employee Benefits Security Administration (EBSA), Internal Revenue Service (IRS), and Pension Benefit Guaranty Corporation (PBGC) have issued final revisions to the Form 5500 Annual Report for plan years beginning on or after January 1, 2022 for defined benefit (DB) plans, multiple employer plans (MEPs) and pooled employer plans (PEPs).

The revisions incorporate some of the changes proposed in September 2021. Other changes proposed are still under consideration.

Changes

Listed below are some highlights of the changes.

For MEPs:

New plan characteristic codes will be included in the Form 5500 instructions to identify if the defined contribution MEP plan is:

  • An association retirement plan
  • A professional employer organization plan (PEO)
  • A PEP
  • A defined contribution MEP other than the above

The instructions will clarify that the plan sponsor and plan administrator for PEP and PEO plans are the pooled plan provider (PPP) and PEO respectively.

For DB plans:

  • Single-employer DB plans with 1,000 or more total participants will be required to provide a 50-year benefit payment projection broken out by categories based on participants’ and beneficiaries’ status.
  • Instructions will be modified to allow certain attachments to Schedules MB and SB to be provided in a spreadsheet rather than in PDF or TXT formats.
  • Plan sponsors of single-employer plans will be required to indicate the first year that the plan elected to use funding relief provided under the American Plan Rescue Act of 2021 (ARPA) if they elected to do so prior to the 2022 plan year.

Under Consideration

The agencies are still evaluating public comments related to changes to the following items:

  • Defined contribution reporting groups and related audit issues
  • Schedule MEP and related reporting requirements regarding MEPs
  • Schedule H and Schedules of Assets
  • Participant counting methodology
  • Reporting for participating employers for Multiple Employer Welfare Arrangements (MEWAs) that file the Form M-1

The agencies have stated that any changes to these items will either be addressed in another final forms revision notice or re-proposed in forthcoming proposal.

Disaster Relief for PR and NM

In response to severe storms, flooding, and landslides in Puerto Rico and wildfires and straight-line winds in New Mexico, the Internal Revenue Service (IRS) has extended various deadlines for impacted businesses and taxpayers. Pension Benefit Guaranty Corporation (PBGC) also offers relief for certain deadlines according to a one-time announcement published in the federal Register on July 2, 2018.

Impacted Areas

In Puerto Rico, individuals who reside or have a business in Cataño, Dorado, Toa Baja, Vega Alta, and Vega Baja municipalities may qualify for tax relief. In New Mexico, individuals who reside or have a business in Colfax, Lincoln, Mora, San Miguel, and Valencia counties may qualify for tax relief.

Deadline Relief

For Puerto Rico, certain deadlines are extended until June 15, 2022 if they fall on or after February 4, 2022 and before June 15, 2022. For New Mexico, certain deadlines are postponed until August 31, 2022 if they fall on or after April 5, 2022 and before August 31, 2022.

Below is a partial list of retirement-impact tax filing and payment deadlines that may be extended:

  • Retirement plan loan repayments under Internal Revenue Code section 72(p)(2)
  • Required minimum distributions under Internal Revenue Code section 401(a)(9)
  • The 10% additional income tax continues to not apply even if the following is missed during the relief period:
    • Substantially equal payments made over the participant’s life or joint lives of the participant and designated beneficiary
    • Deadline for using a distribution from an IRA for a first-time home purchase by the close of the 120th day after the distribution is received
  • Prior tax year contribution deadlines for retirement plans
  • Indirect rollover distribution deadlines
    • 60-day rollovers
    • Rollover of qualified loan offsets
  • Refunds as a result of
    • Excess deferrals
    • ADP/ACP non-discrimination testing
    • Eligible automatic contribution arrangement (EACA) withdrawals
    • Excess IRA contributions
  • Deadline for recontributing qualified reservist distributions
  • Form 5500 and Form 8955-SSA filing
  • Form 5498 for IRAs
  • PBGC premium payments
  • PBGC deadlines that are based on the Form 5500 deadline
  • Single Employer Plan Termination Forms 500 and 501

Additional Resources

For any questions related to IRS deadlines and other disaster-related issues, the IRS has a toll-free number at 1-866-562-5227. For PBGC disaster-related questions, call 1-800-736-2444 ext. 4136.

The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment or tax advice. You should consult with appropriate counsel, financial professionals or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.

Insurance products and plan administrative services provided through Principal Life Insurance Company®, a member of the Principal Financial Group®, Des Moines, IA 50392.

Principal Life Insurance Company, Des Moines, Iowa 50392-0001, www.principal.com, Principal®, Principal Financial Group® and the Principal logo design are registered trademarks of Principal Financial Services, Inc., a Principal Financial Group company, in the United States and are trademarks and service marks of Principal Financial Services, Inc., in various countries around the world.

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