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Deferred pension funding subject to penalties

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Tax Hot Topics newsletter The IRS clarified in a series of questions and answers (Q&As) included in Notice 2020-61, that employers who defer funding of single-employer defined benefit pensions pursuant to the Coronavirus Aid, Relief, and Economic Security (CARES) Act will still be subject to late penalties on any required contributions that remain unpaid after the extended contribution date in 2021.

The CARES Act suspends 2020 funding obligations for single-employer defined benefit pension plans until Jan. 1, 2021, (with interest due) and allows pensions to use the prior year’s funded status for certain benefit restrictions.

The notice also addresses other administrative issues related to pension funding and clarifies that the extended due date for required contribution in 2020 does not change the date by which a contribution must be made in order to be deducted for a taxable year (generally no later than the time prescribed by law for filing the federal income tax return for that taxable year, including extensions).

Contacts:
Jeff Martin
Partner
Washington National Tax Office
T +1 202 521 1526

Keith Mong
Managing Director
Washington National Tax Office
+1 202 521 1554

James Sanchez
Senior Associate
Washington National Tax Office
+1 202 861 4107

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