Notice 2020-35

I. PURPOSE

On March 13, 2020, the President of the United States issued an emergency declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act in response to the ongoing Coronavirus Disease 2019 (COVID-19) pandemic (Emergency Declaration). The Emergency Declaration instructed the Secretary of the Treasury “to provide relief from tax deadlines to Americans who have been adversely affected by the COVID-19 emergency, as appropriate, pursuant to 26 U.S.C. 7508A(a).”

Pursuant to section 7508A of the Internal Revenue Code (Code), the Internal Revenue Service (IRS) is postponing deadlines for certain time-sensitive actions on account of the COVID-19 emergency. This relief is provided with respect to certain employment taxes, employee benefit plans, exempt organizations, individual retirement arrangements (IRAs), Coverdell education savings accounts, health savings accounts (HSAs), and Archer and Medicare Advantage medical saving accounts (MSAs) that, with certain exceptions, are due to be performed on or after March 30, 2020, and before July 15, 2020. In addition, pursuant to § 31.35111(g)(2)(ii) of the Treasury Regulations (Regulations), the IRS is providing a temporary waiver of the requirement that Certified Professional Employer Organizations (CPEOs) file certain employment

tax returns and their accompanying schedules on magnetic media. The relief provided in this notice is provided on account of the ongoing COVID-19 pandemic and is in addition to the relief provided under Notice 2020-18, 2020-15 IRB 590, Notice 2020-20, 2020-16 IRB 660, and Notice 2020-23, 2020-18 IRB 742.

II. BACKGROUND

A. COVID-19 Disaster Relief – Prior Postponement of Certain Deadlines and Other Requirements Pursuant to Section 7508A

Section 7508A provides the Secretary with the authority to postpone the time for performing certain acts under the internal revenue laws for a taxpayer determined by the Secretary to be affected by a federally declared disaster as defined in section 165(i)(5)(A). Pursuant to section 7508A(a), a period of up to one year may be disregarded in determining whether the performance of certain acts is timely under the internal revenue laws.

Section 7508A(b) provides that, in the case of a pension or other employee benefit plan, or any sponsor, administrator, participant, beneficiary, or other person with respect to such a plan, affected by a federally declared disaster or a terroristic or military action described in section 7508A(a), the Secretary may specify a period of up to one year that may be disregarded in determining the date by which any action is required or permitted to be completed. If the Secretary exercises that authority, no plan will be treated as failing to be operated in accordance with its terms solely because the plan disregards any period pursuant to this relief. ¹

Following the Emergency Declaration, the Department of the Treasury (Treasury Department) and the IRS published guidance utilizing the authority provided under section 7508A for the Secretary of the Treasury or his delegate (Secretary) to postpone certain deadlines in the case of a federally declared disaster.

On March 18, 2020, the Treasury Department and IRS issued Notice 2020-17, 2020-15 IRB 590, providing relief under section 7508A(a), which postponed the due date for certain federal income tax payments from April 15, 2020, until July 15, 2020. On March 20, 2020, the Treasury Department and IRS issued Notice 2020-18, which superseded Notice 202017 and provided expanded relief, postponing the due date for filing federal income tax returns and for making federal income tax payments from April 15, 2020, until July 15, 2020. On March 27, 2020, the Treasury Department and the IRS issued Notice 2020-20, which amplified Notice 2020-18 and provided additional relief, postponing certain federal gift (and generation-skipping transfer) tax return filings and payments from April 15, 2020, until July 15, 2020.

On April 9, 2020, the Treasury Department and the IRS issued Notice 2020-23, which provided additional relief pursuant to the Emergency Declaration. Notice 2020-23 provides relief for persons with a federal tax payment obligation specified in section III.A of the notice (Specified Payment), or a federal tax return or other form filing obligation specified in section III.A of the notice (Specified Form), due to be performed (originally or pursuant to a valid extension) on or after April 1, 2020, and before July 15, 2020 (Affected Taxpayers). Notice 2020-23 also provides that the term Affected Taxpayer includes any person who performs a time-sensitive action listed in either § 301.7508A-1(c)(1)(iv) (vi) of the Regulations or Rev. Proc. 201858, 2018-50 IRB 990, due to be performed (originally or pursuant to a valid extension) on or after April 1, 2020, and before July 15, 2020 (Specified Time-Sensitive Action). Thus, for example, under Notice 2020-23, Affected Taxpayers include persons described in section 7508A(b), such as sponsors or plan administrators of qualified retirement plans, due to perform a Specified Time-Sensitive Action. In addition, Affected Taxpayers include exempt organizations with a federal tax

1 Sections 518 and 4002(i) of the Employee Retirement Income Security Act of 1974, Pub. L. No. 93-406, 88 Stat. 829 (1974), as amended (ERISA), similarly authorize the provision of relief under Titles I and IV of ERISA.

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payment, federal tax return, or other form filing obligation specified in section III.A of Notice 2020-23, and exempt organizations performing time-sensitive acts listed in Rev. Proc. 2018-58, which includes the filing of Form 990 series annual information returns.

B. Employment Taxes

1. Interest-free adjustments to correct employment tax reporting errors

For purposes of this notice, “employment tax” means Federal Insurance Contributions Act (FICA) tax imposed on employees by sections 3101(a) and 3101(b) and on employers by sections 3111(a) and 3111(b); Railroad Retirement Tax Act (RRTA) tax imposed on employees by sections 3201(a) and 3201(b) and on employers by sections 3221(a) and 3221(b); and income tax withholding (ITW) imposed by section 3402. To the extent other types of withholding are treated as ITW under section 3402(a) (such as gambling withholding, pension withholding, and backup withholding as set forth in sections 3402(q)(7), 3405(f), and 3406(h) (10), respectively), these other types of withholding are also included in the term “employment tax.”

Sections 6205 and 6413 permit interest-free adjustments to correct employment tax reporting errors, and sections 31.6205-1, 31.6413(a)-1 and 31.6413(a)2 of the Regulations provide related rules for making these adjustments. Notice 2020-23 provided relief for filing claims for credit or refund of any tax, including employment tax, due to be filed on or after April 1, 2020, and before July 15, 2020. However, Notice 2020-23 did not provide relief for employers making interest-free adjustments to correct employment tax reporting errors.

2. Electronic filing requirements for CPEOs

Section 31.3511-1(g)(2) provides that CPEOs must file on magnetic media any Form 941, Employer’s QUARTERLY Federal Tax Return, and Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees, along with all required accompanying schedules. How

ever, § 31.3511-1(g)(2)(ii) provides that the IRS may waive the requirements to file on magnetic media in cases of undue economic hardship. Individual requests for waivers from CPEOs must be made in accordance with applicable guidance. The term “magnetic media” generally includes electronic filing as well as other media specifically permitted under applicable guidance.

C. Employee Benefits

1. Funding provisions for qualified defined benefit pension plans

Section 412 provides minimum funding standards for qualified defined benefit and other pension plans. Section 412(c) provides for waivers of the minimum funding requirements in the event of temporary substantial business hardship. In order for a plan other than a multiemployer plan to receive a waiver, section 412(c) (5) provides that an application for a waiver must be submitted no later than the 15th day of the 3rd month beginning after the close of the plan year for which the waiver is sought.

Section 432(b)(3)(A) provides special rules for certain multiemployer defined benefit plans. For a plan that is subject to those requirements, the plan actuary must make certain certifications each year regarding the plan’s funded status. The deadline for these certifications for a plan year is the 90th day of the plan year. Under section 432(b)(3)(D), in certain circumstances, the plan sponsor is required to provide notice regarding the plan’s funded status to the participants and beneficiaries, the bargaining parties, the Pension Benefit Guaranty Corporation, the Secretary of Labor and, if applicable, the Secretary of the Treasury. Section 432(c)(1) requires, for the first plan year that a multiemployer plan is in endangered status, that the plan sponsor adopt a funding improvement plan providing one or more schedules of revised benefit structures, revised contribution structures, or both, no later than 240 days following the required date for the actuarial certification of endangered status and notify the bargaining parties of the schedules within 30 days after their adoption. Section 432(c)(6) requires the plan sponsor to update the funding im

provement plan and schedules annually and attach that update to the Form 5500 filed for the plan year. Section 432(e)(1) (A) and (3)(B) impose similar adoption, notification, and update requirements with respect to a rehabilitation plan for a multiemployer plan that is certified to be in critical status.

Section 433 provides special funding rules for cooperative and small employer charity pension (CSEC) plans as defined under section 414(y), including rules for certification of funded status and the adoption of a funding restoration plan.

Sections 302, 305 and 306 of ERISA contain provisions that are parallel to sections 412, 432 and 433 of the Code, respectively.

2. Form 5330, Return of Excise Taxes Related to Employee Benefit Plans

The Form 5330 is used to report and pay a variety of excise taxes with respect to employee benefit arrangements and tax-exempt entities. See Table 1 of the Instructions for Form 5330 for a list of filing deadlines for those excise taxes.

3. Certain Tax Exempt and Government Entities/Employee Plans programs

a. Initial remedial amendment period for section 403(b) plans

Section 21.02 of Rev. Proc. 2013-22, 2013-18 IRB 985, as modified by Rev. Proc. 2014-28, 2014-16 IRB 944, and Rev. Proc. 2015-22, 2015-11 IRB 754, and clarified by Rev. Proc. 2017-18, 2017-5 IRB 743, establishes a remedial amendment period that permits an eligible employer to retroactively correct form defects in its written section 403(b) plan by timely adopting a section 403(b) pre-approved plan or by otherwise timely amending its section 403(b) individually designed plan. Rev. Proc. 2017-18 provides that March 31, 2020, is the last day of this initial remedial amendment period.

Rev. Proc. 2019-39, 2019-42 IRB 945, sets forth a system of recurring remedial amendment periods for correcting form defects in section 403(b) individually designed plans and section 403(b) pre-approved plans first occurring after the initial remedial amendment period ends, and

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provides a limited extension of the initial remedial amendment period for certain form defects that is based, in part, on the initial March 31, 2020, deadline. Rev. Proc. 2019-39 also provides deadlines for the adoption of plan amendments for section 403(b) individually designed plans and section 403(b) pre-approved plans with respect to a form defect first occurring after the end of the initial remedial amendment period.

b. Pre-approved defined benefit plans