An annual funding notice (AFN) is required for all defined benefit plans (not defined contribution plans, like 401(k) or 403(b) plans) subject to the Employee Retirement Income Security Act of 1974 (ERISA). The AFN must be provided no later than 120 days after the end of each plan year. For pension plans with a calendar plan year, the 2020 deadline is April 29, 2020 (due to the leap year). Although the CARES Act allows the Department of Labor (DOL) to delay the AFN distribution deadline, the DOL has failed to do so. As a result, the April 29, 2020, distribution deadline still applies.
With so many issues demanding attention amid the COVID‑19 pandemic, plan sponsors and plan administrators could easily miss this deadline. We are hopeful that the DOL will issue an extension; however, in the meantime, plan sponsors and plan administrators need to make arrangements for distributing the AFN by the April 29, 2020, deadline.
(NOTE: The civil penalty for failure to timely provide the AFN is $110 per day payable to each participant or beneficiary who did not receive the AFN. This penalty is not imposed by the DOL, however. Instead, this penalty is assessed by the court, in its discretion. So, any participant or beneficiary entitled to receive a penalty payment may file a civil action in court for such relief. If the court awards the penalty, the penalty amount must be paid to each affected plan participant and beneficiary for the failure period.)
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Warner is here to help! If you need assistance with implementing the CARES Act provisions, please contact Lisa Zimmer, Kent Sparks or a member of Warner’s Employee Benefits and Executive Compensation Practice Group.
