Special Rules for Single-Employer Defined Benefit Pension Plans under the CARES Act

Part IV.--- Items of General Interest

Special Funding and Benefit Limitation Rules for Single-Employer Defined Benefit
Pension Plans under the CARES Act

Notice 2020-61
I. Purpose
This notice provides guidance on the special rules relating to funding of singleemployer defined benefit pension plans, and related benefit limitations, under § 3608 of
the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Pub. L. No. 116136 (134 Stat. 281).
II. Background
A.

Minimum funding rules for single employer defined benefit plans
1. General timing requirements

Section 412 of the Internal Revenue Code (Code) provides that a sponsor of a
qualified defined benefit plan (other than a multiemployer plan as defined in § 414(f) or
a CSEC plan as defined in § 414(y)) must make contributions to or under the plan for
the plan year that, in the aggregate, are not less than the minimum required contribution
determined under § 430 for the plan year. Section 4971(a) imposes an excise tax on an
employer that sponsors a plan subject to § 412 that has an unpaid minimum required
contribution within the meaning of § 4971(c)(4) as of the end of the plan year.
Section 430(j)(1) provides that the due date for the payment of any minimum
required contribution for a plan year is 8½ months after the close of the plan year.
Section 430(j)(2) provides that any payment made on a date other than the valuation
date for the plan year must be adjusted for interest accruing for the period between the
valuation date and the payment date, determined using the plan's effective interest rate
under § 430(h)(2)(A) for the plan year.
Section 430(j)(3) provides that if the plan had a funding shortfall (as defined in
§ 430(c)(4)) for the preceding plan year, then the plan sponsor must pay four quarterly
installments toward the required minimum contribution for the plan year. The due dates
for the installments are April 15, July 15, and October 15 of the plan year, and January
15 of the following year (adjusted for a plan year that is not a calendar year under
§ 1.430(j)-1(c)(6)). Section 430(j)(3)(D)(i) provides that each quarterly installment is 25
percent of the required annual payment defined in § 430(j)(3)(D)(ii). Section
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430(j)(3)(A) provides that if a quarterly installment is paid after the due date for that
installment, then the interest rate that applies for the period of underpayment (in lieu of
the interest rate that would apply under § 430(j)(2)) is the plan's effective interest rate
plus 5 percentage points.
Section 430(g)(4)(A) provides that if a plan sponsor makes a contribution to the
plan after the valuation date for the plan year in which the contribution is made, and the
contribution is for a preceding plan year, the contribution is taken into account as an
asset of the plan for the plan year in which it is made, except that only the present value
(determined as of the valuation date) of that contribution may be taken into account.
For this purpose, the present value of the contribution is determined using the effective
interest rate for the preceding plan year for which the contribution is made.
2. CARES Act changes
Section 3608(a)(1) of the CARES Act provides that any minimum required
contribution that would otherwise be due under § 430(j) of the Code (and § 303(j) of the
Employee Retirement Income Security Act, Pub. L. 93-406, as amended (ERISA))
during calendar year 2020 (including quarterly installments under § 430(j)(3) of the
Code and § 303(j)(3) of ERISA) are due on January 1, 2021. Section 3608(a)(2) of the
CARES Act provides that those contributions and installments are to be increased with
interest accruing for the period between the original due date for the contribution or
installment and the date of the payment at the effective interest rate for the plan for the
plan year that includes the payment date.
B.

Benefit limitations for underfunded defined benefit plans
1. General rules regarding benefit limitations

Section 436 of the Code provides limits on benefits and benefit accruals under
single-employer defined benefit pension plans, which are applied based on the plan’s
adjusted funding target attainment percentage (AFTAP) for a plan year. Section 436(b)
provides generally that unpredictable contingent event benefits resulting from an event
may not be paid if, taking into account the payment of those benefits, the plan’s AFTAP
would be less than 60 percent. Section 436(c) provides generally that no amendment
increasing liabilities may take effect if, after taking into account that amendment, the
plan’s AFTAP would be less than 80 percent. Section 436(d) provides generally that
the plan may not pay certain accelerated forms of benefit (such as a single-sum
distribution) if the plan’s AFTAP is less than 80 percent. Section 436(e) provides
generally that benefit accruals must cease if the plan’s AFTAP is less than 60 percent.
2. CARES Act changes
Section 3608(b) of the CARES Act provides that for purposes of applying § 436
of the Code (and § 206(g) of ERISA), a plan sponsor may elect to treat the plan’s

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AFTAP for the last plan year ending before January 1, 2020, as the AFTAP for plan
years that include calendar year 2020.
C.

Other rules related to contributions and benefit limitations

Under § 430(f), the plan sponsor of a defined benefit plan that is not a
multiemployer plan may elect to maintain a prefunding balance that may be used, at the
plan sponsor’s election, to offset the minimum required contribution for a plan year. 1
Under § 430(f)(6)(B)(i), a plan sponsor may elect to add contributions that exceed the
minimum required contribution for a plan year (adjusted with interest using the effective
interest rate for the plan year in accordance with § 430(f)(6)(B)(ii)) to the plan’s
prefunding balance. A plan sponsor may also elect to reduce the plan’s prefunding
balance or the funding standard carryover balance as provided in § 430(f)(5). Section
1.430(f)-1(f)(1)(i) generally provides that any election under § 430(f) by the plan sponsor
must be made by providing written notification of the election to the plan's enrolled
actuary and the plan administrator. Section 1.430(f)-1(f)(2)(i) generally provides that
any election under § 430(f) with respect to a plan year must be made no later than the
last date for making the minimum required contribution for the plan year as described in
§ 430(j)(1), or such later date as prescribed in guidance published in the Internal
Revenue Bulletin. However, § 1.430(f)-1(f)(2)(iii) provides that any election to reduce
the prefunding balance or funding standard carryover balance for a plan year (for
example, in order to avoid or terminate a benefit restriction under § 436) must be made
by the end of the plan year to which the election relates.
Section 436(h) provides rules that apply prior to the certification of the AFTAP for
a plan year by the plan’s actuary. Under § 436(h)(1), if a benefit limitation applied to a
plan on the last day of the preceding plan year, then the current year’s AFTAP generally
is presumed to be equal to the prior year’s AFTAP for the period beginning on the first
day of the plan year and ending when the plan’s enrolled actuary certifies the AFTAP for
the current plan year. Under § 436(h)(3), if (i) the plan’s enrolled actuary has not
certified the AFTAP for the current plan year by the first day of the 4th month of the plan
year, and (ii) the AFTAP for the prior plan year did not result in the application of a
benefit limitation for that prior plan year (but would have resulted in the application of a
benefit limitation had that AFTAP been 10 percentage points lower), then the AFTAP for
the current plan year is presumed to be equal to 10 percentage points less than the
AFTAP for the prior plan year, for the period beginning on that first day of the fourth
month and ending when the enrolled actuary of the plan certifies the plan’s AFTAP for
the current plan year. Under § 436(h)(2), if no certification of the AFTAP for the current
plan year is made before the first day of the 10th month of that year, then the AFTAP for
the current plan year is presumed to be less than 60 percent as of that first day.
Sections 436(b)(2) and (c)(2) provide rules that allow a plan sponsor to avoid or
terminate benefit restrictions under § 436(b) or (c) by making an additional contribution
of a certain amount to the plan. Section 1.436-1(f) provides rules for these
1

Similar elections to maintain a funding standard carryover balance and to use that balance to offset the
minimum required contribution are available to the plan sponsor.

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contributions, which are referred to as § 436 contributions. Section 1.436-1(f)(2)(i)(A)
provides that any § 436 contribution made by a plan sponsor on a date other than the
valuation date for the plan year must be adjusted with interest at the plan's effective
interest rate for the plan year. If the plan's effective interest rate for the plan year has
not been determined at the time of the contribution, then this interest adjustment must
be made using the highest of the three segment rates as applicable for the plan year. In
such a case, if the effective interest rate for the plan year is subsequently determined to
be less than that highest rate, the excess is recharacterized as an employer contribution
taken into account under § 430 for the current plan year.
The regulations under § 436 address the calculation of a plan’s AFTAP.
Section 1.436-1(h)(4)(iii) provides rules relating to changes in a plan’s AFTAP after it
has been certified, and the effect of such a change depends on whether the change is
material (within the meaning of § 1.436-1(h)(4)(iii)(B)) or immaterial (within the meaning
of § 1.436-1(h)(4)(iii)(C)). In general, a material change in AFTAP is defined as a
change under which plan operations would have been different based on the
subsequent AFTAP determination, and an immaterial change in AFTAP is defined as a
change that is not material. Under § 1.436-1(h)(4)(iv)(A), a material change in a plan’s
AFTAP will cause a plan to fail to comply with § 401(a).
Section 1.436-1(h)(4)(iii)(C) provides a special rule that, subject to certain
conditions, deems a change in a plan’s AFTAP to be immaterial (even if the change
would otherwise be material) if the change results from an event specified in
§ 1.436-1(h)(4)(iii)(C)(1) through (8). Section 1.436-1(h)(4)(iii)(C)(9) provides authority
for the expansion of the list of events for which a resulting change in AFTAP may be
deemed immaterial through publication of guidance in the Internal Revenue Bulletin.
Deemed immaterial treatment under § 1.436-1(h)(4)(iii)(C) with respect to an event that
results in a change in AFTAP is conditioned on the AFTAP being recertified as soon as
reasonably practicable after the event. The effect of this deemed immaterial treatment
is that the change in the plan’s AFTAP will not cause the plan to fail to comply with
§ 401(a) merely because of the change, provided that the plan administrator reflects the
new AFTAP in plan operations on a prospective basis beginning with the date of the
recertification.
Section 404 provides rules regarding the deductibility of employer contributions
to an employees’ trust or annuity plan and compensation under a deferred payment
plan. Under § 404(a)(1)(A), contributions paid to the trust of a qualified defined benefit
pension plan are deductible in the taxable year when paid, subject to the applicable
limits. Under § 404(a)(6), a taxpayer making a contribution in a taxable year is deemed
to have made the contribution on the last day of the preceding taxable year if the
payment is on account of that preceding taxable year and is made not later than the
time prescribed by law for filing the return for that preceding taxable year (including
extensions thereof).
Under § 101 of Reorganization Plan No. 4 of 1978 (43 FR 47713) and § 3002(c)
of ERISA, the Secretary of the Treasury has interpretive jurisdiction over the subject
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matter addressed in this notice for purposes of ERISA, as well as the Code. Thus, the
provisions of this notice pertaining to §§ 430 and 436 of the Code also apply for
purposes of §§ 303 and 206(g) of ERISA.
III. Questions & Answers
The following questions and answers provide guidance regarding § 3608 of the
CARES Act. To the extent the instructions for Schedule SB, “Single-Employer Defined
Benefit Plan Actuarial Information” of Form 5500, “Annual Return/Report of Employee
Benefit Plan” are inconsistent with this guidance, this guidance supersedes those
instructions.
A.

Extended deadline for contributions and interest adjustments

Q-1: To which plans does the extended contribution due date of January 1,
2021, under § 3608(a)(1) of the CARES Act, apply?
A-1: The extended contribution due date of January 1, 2021, applies to a defined
benefit plan for which the minimum required contribution is determined under § 430.
Thus, this extended contribution due date of January 1, 2021, does not apply to a
multiemployer plan, a CSEC plan, a fully-insured plan described in § 412(e)(3), or a
money purchase pension plan.
Q-2: How is a contribution adjusted for interest between the valuation date and
the payment date for the contribution, taking into account the interest adjustment rules
of § 3608(a)(2) of the CARES Act?
A-2: To determine the portion of the minimum required contribution for a plan
year that is satisfied by a contribution, § 430(j)(2) of the Code and § 1.430(j)-1(b)(4)(i)
provide that the contribution is adjusted for interest for the period between the valuation
date for the plan year and the payment date for the contribution, at the plan's effective
interest rate for the plan year. Under § 3608(a)(2) of the CARES Act, any payment that
is made after the original due date for the contribution and by the extended due date
under § 3608(a)(1) must be increased for the period between the original due date and
the payment date at the effective interest rate for the plan year that includes the
payment date. Thus, if a contribution for a plan year were to be made during this
period, the amount of the contribution must be larger to account for interest (determined
using the plan’s effective interest rate for the plan year that includes the payment date)
for the period between the original due date and the payment date in order to satisfy the
minimum required contribution for the plan year to the same extent as a contribution
made on the original due date. The following example illustrates the application of the
interest adjustment described in this A-2:
(a) Plan A has a plan year that is the calendar year and has a 2019 minimum
required contribution, calculated as of the January 1, 2019, valuation date, of
$1,000,000. The effective interest rate for the 2019 plan year is 5.75%, and the
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effective interest rate for the 2020 plan year is 5.65%. Plan A had no funding shortfall
for 2018 (so there are no quarterly installment requirements for 2019), and the plan
sponsor made no contributions for 2019 (and no elections to use a funding standard
carryover balance or prefunding balance) before September 15, 2020. The actuary
takes into account February 29, 2020, in counting the number of days in 2020 for
purposes of calculating interest.
(b) In the absence of § 3608(a) of the CARES Act, the final contribution for the
2019 plan year would have been due on September 15, 2020. A final contribution of
$1,100,009 made on September 15, 2020, would satisfy the 2019 minimum required
contribution. This is because a contribution of $1,100,009 made on that date,
discounted using the 2019 effective interest rate to January 1, 2019, would equal the
$1,000,000 minimum required contribution ($1,100,009 ÷1.0575(258/366 + 365/365) =
$1,000,000).
(c) Pursuant to § 3608(a)(1) of the CARES Act, the plan sponsor has until
January 1, 2021, to satisfy the 2019 minimum required contribution for Plan A. If, on
December 31, 2020, the plan sponsor were to make a single contribution necessary to
satisfy the 2019 minimum required contribution for Plan A, the contribution would be
$1,117,827. This is because a contribution of $1,117,827 made on December 31, 2020,
discounted using the 2020 effective interest rate back to September 15, 2020, and the
2019 effective interest rate from September 15, 2020, to January 1, 2019, would equal
the $1,000,000 minimum required contribution ($1,117,827 ÷ 1.0565(107/366) ÷
1.0575(258/366 + 365/365) = $1,000,000).
Q-3: What is the result if the contribution that the plan sponsor makes is less
than the amount that was due on the original due date for the minimum required
contribution, as increased with interest pursuant to § 3608(a)(2) of the CARES Act?
A-3: If, after the original due date for the minimum required contribution for a
plan year, the plan sponsor makes a contribution that is less than the amount that was
due on that date, as adjusted for additional interest to account for the period between
the original due date and the date of payment of the contribution (at the effective
interest rate for the plan year in which the payment is made), then a portion of the
minimum required contribution for that plan year would remain unpaid. The unpaid
portion of the minimum required contribution, determined as of the valuation date and
based on contributions made on or before January 1, 2021, with the contributions
discounted for interest to the valuation date as described in A-2 of this notice, would
give rise to an unpaid minimum required contribution within the meaning of § 4971(c)(4)
of the Code that would be subject to an excise tax under § 4971(a). Furthermore, a
contribution made after January 1, 2021, to satisfy that unpaid minimum required
contribution must be adjusted for interest for the period between the date that the
contribution is made and the valuation date at the effective interest rate for the plan year
for which the contribution is made (with additional interest as required to reflect any late
quarterly installments for the plan year). The following example illustrates the situation
described in this A-3:
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The facts are the same as in the example in A-2 of this notice, except that the
plan sponsor makes a contribution of $1,100,009 on December 31, 2020, and makes no
other contributions by January 1, 2021. The $1,100,009 contribution is discounted
using the 2020 effective interest rate back to September 15, 2020, and the 2019
effective interest rate from September 15, 2020, to January 1, 2019, resulting in
$984,061 toward satisfaction of the 2019 plan year minimum required contribution
($1,100,009 ÷ 1.0565(107/366) ÷ 1.0575(258/366 + 365/365) = $984,061). Because the
contribution is discounted for a longer period, this amount of the discounted contribution
is not enough to satisfy the minimum required contribution of $1,000,000 as of January
1, 2019, resulting in an unpaid minimum required contribution of $15,939 ($1,000,000 $984,061= $15,939). The $15,939 unpaid minimum required contribution is subject to
excise tax under § 4971(a).
Q-4: Does the extended due date under § 3608(a) of the CARES Act apply to
contributions in excess of the amount needed to satisfy the minimum required
contribution?
A-4: Yes, if the contribution deadline under § 430(j)(1) of the Code for a plan
year is during 2020, a contribution in excess of the amount needed to satisfy the
minimum required contribution for the plan year that is made by January 1, 2021, may
be designated as a contribution for that plan year. The present value of the excess
contributions for a plan year, which can be used to increase the prefunding balance, is
determined using the interest rate adjustment described in A-2 of this notice. In
accordance with § 1.430(f)-1(b)(1)(iv)(A), this present value is increased for interest for
the period between the valuation date for the plan year and the first day of the next plan
year. In general, this increase for interest is made using the plan’s effective interest rate
for the plan year for which the contributions are made. However, pursuant to § 1.430(f)1(b)(3)(iii), this present value is instead adjusted using the plan’s investment experience
to the extent that the excess results from the use of a funding balance to offset the
minimum required contribution.
Q-5: How is the amount of a quarterly installment determined, if the extended
due date under § 3608(a) of the CARES Act applies to the installment?
A-5: Section 3608(a)(2) of the CARES Act specifies that, to determine the
amount of a quarterly installment due by the extended due date under § 3608(a)(1) of
the CARES Act of January 1, 2021, the amount of that installment is increased from the
installment’s original due date to the payment date at the effective interest rate for the
plan year that includes the date the quarterly installment is paid. Section 1.430(j)1(c)(3)(ii) provides that if a contribution is made before the due date for the required
installment to which it is allocated, then the amount credited toward that installment
includes interest on the contribution from the date of the contribution to the due date for
the installment (at the plan's effective interest rate for the plan year for which the
installment is paid). The following example illustrates the application of the interest
adjustment described in this A-5:

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(a) The facts are the same as in the example in A-2 of this notice. In addition, for
2020, Plan A has required quarterly installments of $250,000.
(b) In the absence of § 3608(a)(1) of the CARES Act, the first quarterly
installment for the 2020 plan year would be due on April 15, 2020. Under § 3608(a)(1)
of the CARES Act, the plan sponsor’s deadline for satisfying this quarterly installment is
January 1, 2021. If the contribution is made on December 31, 2020, then the amount
necessary to satisfy the first quarterly installment under § 3608(a)(2) of the CARES Act
is $259,954 ($250,000 × 1.0565(260/366) = $259,954).
(c) Under the extended deadline of § 3608(a) of the CARES Act, the quarterly
installments for Plan A that were originally due July 15, 2020, and October 15, 2020, are
also now due on January 1, 2021. The amount of these quarterly installments would be
calculated in the same manner as shown in paragraph (b) of this example, except that
the increase for interest would be for the period between the original due date and the
payment date.
(d) If, instead of waiting until December 31, 2020, the plan sponsor makes a
contribution of $400,000 on June 1, 2020, then some of that contribution will satisfy the
first quarterly installment (originally due April 15, 2020) and the balance of that
contribution will be applied towards the second quarterly installment (originally due July
15, 2020). The portion of the June 1 contribution that is used to satisfy the first quarterly
installment is $251,771 ($250,000 × 1.0565(47/366) = $251,771). Therefore, the balance
of that contribution, which will be applied to the second quarterly installment, is
$148,229 ($400,000 - $251,771 = $148,229). The remaining contribution needed to
satisfy the second quarterly installment on its original due date of July 15, 2020, is
$100,788 ($250,000 - $148,229 × 1.0565(44/366) = $100,788). If the contribution
necessary to satisfy that quarterly installment is not made before that due date, but is
made later in the year, then the contribution necessary to satisfy the unpaid installment
must be increased with interest at the effective interest rate for the plan year from July
15, 2020, until it is made.
Q-6: For a quarterly installment originally due during 2020 for which the due date
is extended under § 3608(a) of the CARES Act to January 1, 2021, what is the result if a
plan sponsor does not satisfy that installment?
A-6: If a plan sponsor does not satisfy a quarterly installment originally due
during 2020 by the extended due date under § 3608(a) of the CARES Act of January 1,
2021, then under § 430(j)(3)(A) of the Code, the unpaid portion of that installment is
subject to a higher interest rate for the period during which the installment (or a portion
of the installment) remains unpaid when determining the amount of the minimum
required contribution that is satisfied by a contribution. As a result of § 3608(a) of the
CARES Act, the period of underpayment does not begin until January 1, 2021. The
unpaid portion of the quarterly installment as of that date, if any, is re-determined as of
the original due date for the installment (based on contributions made on or before
January 1, 2021, and discounted for interest as described in A-5 of this notice) and then
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increased from the original due date to January 1, 2021, using the effective interest rate
for the plan year for which the installment is due. The following examples illustrate the
application of these rules:
Example 1: (a) The facts are the same as in the example in A-5 of this notice.
The plan sponsor of Plan A makes a contribution of $100,788 on July 15, 2020. As
shown in paragraph (d) of the example in A-5 of this notice, the first two quarterly
installments have been satisfied by their original due dates. The plan sponsor does not
make any additional contributions by the extended due date of January 1, 2021. As a
result, the third quarterly installment of $250,000 (originally due on October 15, 2020)
remains unpaid as of that date, and this unpaid installment is increased using the
effective interest rate for 2020, resulting in an unpaid installment on January 1, 2021 of
$252,945 ($250,000 × 1.0565(78/366)).
(b) If the plan sponsor makes its next contribution to Plan A on February 15,
2021, the first $252,945 of that contribution will be used to satisfy the missed third
quarterly installment. The interest rate used to discount the late required installment
back to the due date will include the 5 percentage point increase for the period of time
from February 15, 2021, to the extended due date of January 1, 2021, resulting in
$249,809 as of January 1, 2021 ($252,945 ÷ 1.1065(45/365)). Therefore, the first
$252,945 of that contribution that is used to satisfy the third quarterly installment would
result in $236,449 toward satisfaction of the 2020 plan year minimum required
contribution for Plan A ($249,809 as of January 1, 2021, divided by 1.0565).
Example 2: (a) The facts are the same as in the first example in this A-6, except
that Plan A has a plan year that began October 1, 2019, and ended September 30,
2020, and the required quarterly installments for that plan year are $200,000. In
addition, Plan A’s effective interest rate is 5.71% for the plan year beginning October 1,
2019, and 5.61% for the plan year beginning October 1, 2020. The first three quarterly
installments for the plan year were paid by the original due dates and the fourth
quarterly installment of $200,000 (originally due October 15, 2020) is not paid by
January 1, 2021. Because this quarterly installment was not paid by January 1, 2021,
under the rules of this A-6, the unpaid portion of the installment is increased to January
1, 2021, using the effective interest rate for the plan year beginning October 1, 2019,
resulting in an unpaid installment on that date of $202,387 ($200,000 × 1.0571(78/365)).
(b) Note that if the contributions made by January 1, 2021, satisfy some, but not
all, of the fourth quarterly installment, then the unpaid portion of that installment would
be re-determined as of October 15, 2020, by discounting those contributions from the
date of the contribution to October 15, 2020 (using the 5.61% effective interest rate for
the plan year in which the contributions are made). The resulting unpaid quarterly
installment is increased with interest to January 1, 2021 (using the 5.71% effective
interest rate for the plan year for which the installment is due, rather than the 5.61%
effective interest rate for the 2020 plan year). For example, if a contribution of $120,000
was made on December 15, 2020, then the unpaid portion of the quarterly installment

9

as of January 1, 2021, is $82,058 (($200,000 – ($120,000 ÷ 1.0561(61/365))) ×
1.0571(78/365)).
Q-7: How are the interest adjustments determined if the plan’s effective interest
rate for the plan year in which the contribution is made has not been determined at the
time the payment is made?
A-7: If the plan’s effective interest rate for the plan year in which the contribution
is made has not been determined at the time the payment is made, then the rules for
determining the interest rate for this adjustment are the same as the rules for
determining the interest rate for the interest adjustment under § 1.436-1(f)(2)(i)(A).
Thus, the interest adjustment must be made using the highest of the three segment
rates for the plan year. However, if the effective interest rate for the plan year in which
the contribution is made is subsequently determined to be less than the interest rate
that was used under the preceding sentence, the difference in the present value of the
contribution as of the valuation date may be added to the prefunding balance for the
plan year. The following example illustrates the situation described in this A-7:
(a) The facts are the same as in the example in A-3 of this notice, except that the
plan sponsor realizes that the December 31, 2020, contribution that was made would
result in an unpaid minimum required contribution for 2019 and wishes to make a final
contribution on January 1, 2021. However, the 2021 effective interest rate is not known
as of the date of the contribution.
(b) Under this A-7, the amount necessary to avoid an unpaid minimum required
contribution for 2019 is determined using the highest of the three segment rates for the
2021 plan year in accordance with the rules of § 1.436-1(f)(2)(i)(A). For purposes of this
example, it is assumed that the highest of the three segment rates for the 2021 plan
year is 5.45%. Therefore, the amount of the contribution needed to avoid an unpaid
minimum required contribution if made on January 1, 2021, is $17,810 ($15,939 x
1.0575(258/366 + 365/365) x 1.0545(108/366)).
(c) Later during 2021, the 2021 effective interest rate is determined to be 5.15%.
The $17,810 contribution made on January 1, 2021, results in $15,953 ($17,810 ÷
1.0515(108/366) ÷ 1.0575(258/366 + 365/365)) toward the 2019 minimum required contribution.
As a result, the plan sponsor has excess contributions for 2019, which have a present
value as of January 1, 2019, of $14 ($15,953 - $15,939). This amount, adjusted for
interest in accordance with § 1.430(f)-1(b)(1)(iv), may be added to the prefunding
balance as of January 1, 2020.
Q-8: If a plan sponsor makes a contribution for a plan year after the original due
date for the plan year, but on or before the extended due date under § 3608(a) of the
CARES Act, how is it reported on Schedule SB of Form 5500?
A-8: Except as provided in this A-8, there are no special rules for reporting
contributions that are made for a plan year after the original due date for the plan year
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but on or before the extended due date under § 3608(a) of the CARES Act. Thus, a
plan’s actuary may not report contributions on Schedule SB of Form 5500 that will be
made after the actuary signs the Schedule SB. If any contributions are made after the
actuary signs the Schedule SB and the Form 5500 for a plan year has been filed but
before the extended due date under § 3608(a) of the CARES Act, then the contributions
may be designated as for that prior plan year only if an amended Form 5500 that
includes an amended Schedule SB reflecting those contributions is filed.
In addition, if a plan sponsor makes a contribution for a plan year (including a
quarterly installment) after the original due date for that contribution but on or before the
extended due date under § 3608(a) of the CARES Act, the plan’s actuary must attach to
the Schedule SB a schedule supporting the line 19 entry for discounted employer
contributions showing the dates and amounts of individual contributions, the year to
which the contributions (or portion of the individual contributions) are applied, the
effective interest rate or rates that apply to those contributions (including the effective
rate of interest for the plan year in which a payment subject to § 3608(a) of the CARES
Act occurs), the 5 percentage point increase that applies for late quarterly installments,
the periods during which each such rate applies, and the interest-adjusted employer
contributions for the plan year. This schedule must be attached even if the contributions
were made by the due date under § 3608(a) of the CARES Act.
Q-9: Is a contribution for a plan year that is made after the original due date for
the plan year (but on or before the extended due date for the plan year under § 3608(a)
of the CARES Act) taken into account for purposes of determining the value of plan
assets for a plan year following the plan year for which the contribution is made?
A-9: Yes, for purposes of § 430, a contribution that is made after the original due
date for a plan year (but on or before the extended due date for the plan year under
§ 3608(a) of the CARES Act) is taken into account as of a valuation date for a plan year
after the plan year for which the contribution was made. Under § 1.430(g)-1(d)(1)(i), for
purposes of determining the value of plan assets, if an employer makes a contribution to
the plan after the valuation date for the current plan year and the contribution is for an
earlier plan year, then the present value of the contribution determined as of that
valuation date is taken into account as an asset of the plan as of the valuation date,
provided the contribution is made before a specified deadline. The specified deadline is
the deadline for contributions under § 430(j)(1) for the plan year immediately preceding
the current plan year. However, that deadline is extended by § 3608(a)(1) of the
CARES Act. Furthermore, the interest adjustment rules of § 3608(a)(2) of the CARES
Act (as described in A-2 of this notice) override the discounting rules that apply
generally for this purpose. Note, however, under § 1.436-1(h)(4)(i)(B), certification of
the AFTAP for a plan year must not take into account contributions that are expected to
be made after the certification date. The following example illustrates the application of
these rules:

11

(a) Plan C has a plan year that begins on October 1 and ends on September 30,
and a valuation date that is the first day of the plan year. A contribution of $1,000,000 is
made on December 31, 2020, for the plan year beginning on October 1, 2018.
(b) As of October 1, 2019 (the valuation date for the plan year following the plan
year for which the December 31, 2020, contribution was made), the present value of the
contribution is included in plan assets for purposes of § 430 as a contribution
receivable. That present value is determined by discounting the contribution from
December 31, 2020, to June 15, 2020 (the original due date for the minimum required
contribution for the plan year), at the effective interest rate for the plan year beginning
October 1, 2020 (the plan year in which the contribution is made), and further
discounting the contribution from June 15, 2020, to October 1, 2019, at the effective
interest rate for the plan year beginning October 1, 2018 (the plan year for which the
contribution is made).
(c) As of October 1, 2020 (the valuation date for the second plan year following
the plan year for which the December 31, 2020, contribution was made), the present
value of the contribution is included in plan assets for purposes of § 430 as a
contribution receivable. That present value is determined by discounting the
contribution from December 31, 2020, to October 1, 2020, at the effective interest rate
for the plan year beginning October 1, 2020 (the plan year in which the contribution is
made).
Q-10: Does the extended due date under § 3608(a) of the CARES Act change
the date by which a plan sponsor may make an election to increase a prefunding
balance or to use a prefunding balance or a funding standard carryover balance to
offset the minimum funding requirement for a plan year?
A-10: Yes, if the plan year is a plan year for which the extended due date for
minimum required contributions under § 3608(a) of the CARES Act applies, then the
deadline for a plan sponsor’s election to increase 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 1, 2021.
Q-11: Does the extended due date under § 3608(a) of the CARES Act change
the date by which a contribution must be made in order to be deducted for a taxable
year under § 404 of the Code?
A-11: No, the extended due date under § 3608(a) of the CARES Act does not
change the date by which a contribution must be made in order to be deducted for a
taxable year under § 404 of the Code. Under § 404(a)(6), a taxpayer is deemed to have
made a payment on the last day of the preceding taxable year if the payment is on
account of that taxable year and is made no later than the time prescribed by law for
filing the return for that taxable year (including extensions).
B.

Use of prior year AFTAP for benefit restrictions
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Q-12: May a plan sponsor make an election under § 3608(b) of the CARES Act
(to apply the AFTAP for the last plan year ending before January 1, 2020) for a plan
with a plan year that is not a calendar year?
A-12: Yes, a plan sponsor may make an election under § 3608(b) of the CARES
Act for a plan year that includes any portion of calendar year 2020. If the election is
made for such a plan year, the AFTAP that applies for the plan year pursuant to the
election is the AFTAP certified for the last plan year that ends on or before December
31, 2019. For example, if a plan sponsor makes an election under § 3608(b) of the
CARES Act for a plan year that runs from July 1, 2019, to June 30, 2020, then the
AFTAP that applies to determine benefit limitations under § 436 of the Code for that
plan year is the certified AFTAP from the plan year that ends on June 30, 2019. In
addition, that plan sponsor may separately elect to use that same AFTAP for the plan
year that begins on July 1, 2020.
Q-13: What procedures must a plan sponsor follow for making an election under
§ 3608(b) of the CARES Act?
A-13: The election described in § 3608(b) of the CARES Act must be made
using the procedures that apply for elections relating to funding balances specified in
§ 1.430(f)-1(f)(1)(i). Thus, the plan sponsor must provide written notification of the
election to the plan's actuary and the plan administrator. However, a plan sponsor’s
election made using a different procedure will not be treated as invalid provided that, by
September 30, 2020, the plan sponsor complies with the requirement described in the
first sentence of this A-13.
Q-14: If a plan’s actuary has not certified the plan’s AFTAP for a plan year
before the plan sponsor makes an election under § 3608(b) of the CARES Act, what is
the effect of the election for purposes of the presumption rules of § 436(h) of the Code?
A-14: If a plan’s actuary has not certified the plan’s AFTAP for a plan year before
the plan sponsor makes the election under § 3608(b) of the CARES Act, then the plan
sponsor’s election is treated as a certification of the AFTAP for purposes of the
presumption rules of § 436(h) of the Code. Thus, beginning with the date of the
election, the AFTAP for the last plan year ending on or before December 31, 2019,
applies for the plan year for which the election is made, rather than any presumed
AFTAP determined under § 1.436-1(h)(1), (2), or (3). The following example illustrates
the operation of this rule:
(a) Plan B, which is not a collectively bargained plan, has a plan year that is a
calendar year. On September 30, 2019, the actuary for Plan B certified the 2019
AFTAP to be 82%. On April 30, 2020, before the actuary has certified the AFTAP for
2020, the plan sponsor makes an election under § 3608(b) of the CARES Act to apply
the 2019 AFTAP to the 2020 plan year.

13

(b) Section 1.436-1(h)(2) applies to the plan (because, as of April 1, 2020, the
plan’s actuary has not certified the plan’s AFTAP for 2020 and the AFTAP for 2019 was
at least 80 percent and less than 90 percent). Accordingly, under § 1.436-1(h)(2)(iii),
the presumed AFTAP for 2020 is reduced to 72 percent beginning on April 1, 2020.
(c) The plan sponsor’s election under § 3608(b) of the CARES Act is treated as a
certification of the plan’s AFTAP for the plan year. Accordingly, under § 1.4361(h)(2)(v), the 2019 AFTAP of 82 percent is used for the plan beginning April 30, 2020.
Q-15: Is a plan’s actuary required to certify the plan’s AFTAP for a plan year for
which the plan sponsor makes the election under § 3608(b) of the CARES Act?
A-15: A plan’s actuary generally is required to certify the plan’s AFTAP for a plan
year for which the plan sponsor makes the election under § 3608(b) of the CARES Act.
This is because, as provided in A-18 of this notice, the certified AFTAP generally is
relevant for the next plan year. However, if the plan sponsor makes the election under
§ 3608(b) of the CARES Act for a plan year that begins in 2019 and ends in 2020 and
also makes an election for the next plan year, then the actuary is not required to certify
the plan’s AFTAP for the plan year that begins in 2019.
If the plan’s actuary has certified an AFTAP for a plan year, then the Schedule
SB of Form 5500 for that plan year should reflect the certified AFTAP. Without regard
to whether the plan’s actuary has certified an AFTAP for a plan year, if the plan sponsor
made an election under § 3608(b) of the CARES Act, then the plan’s actuary should
attach to the Schedule SB a statement relating to the line 15 entry stating that the plan
sponsor made that election, the date of that election, and the AFTAP that applied for the
plan year pursuant to the election.
Q-16: If a plan’s actuary certified the plan’s AFTAP for a plan year for which the
plan sponsor later makes the election under § 3608(b) of the CARES Act, what is the
effect of that certification?
A-16: If a plan’s actuary certified the plan’s AFTAP for a plan year before the
plan sponsor makes the election under § 3608(b) of the CARES Act, then the plan
sponsor’s election is treated as a subsequent determination of the AFTAP for that plan
year. However, pursuant to § 1.436-1(h)(4)(iii)(C)(9) and this notice, the plan sponsor’s
election is eligible for deemed immaterial treatment (and for purposes of § 1.4361(h)(4)(iii)(C), the plan sponsor’s election is treated as the recertification on the part of
the actuary that is otherwise required for deemed immaterial treatment pursuant to
§ 1.436-1(h)(4)(v)(D)). Thus, the AFTAP that applies pursuant to the plan sponsor’s
election is applied on a prospective basis beginning with the date of the election.
If a plan’s actuary certifies the plan’s AFTAP for a plan year after the plan
sponsor makes the election under § 3608(b) of the CARES Act for that plan year, then
that certified AFTAP does not apply for that plan year unless the plan sponsor revokes
the election. Any revocation must be made using the same procedures as the election,
14

and, in that case, the certified AFTAP is treated as a subsequent determination of the
AFTAP that is not eligible for deemed immaterial treatment under § 1.436-1(h)(4)(iii)(C).
Q-17: How does the restriction on plan amendments and unpredictable
contingent event benefits apply if the AFTAP that applies is pursuant to a plan sponsor’s
election under § 3608(b) of the CARES Act?
A-17: If the AFTAP that applies is pursuant to a plan sponsor’s election under
§ 3608(b) of the CARES Act, then the restriction on plan amendments and
unpredictable contingent event benefits is applied using the rules of § 1.436-1(g)(2)
through (4) (which apply for the period in a plan year during which a § 436(h)
presumption applies), except that the AFTAP that applies pursuant to the plan sponsor’s
election is substituted for the presumed AFTAP. Thus, for example, the AFTAP that
applies pursuant to the plan sponsor’s election will be used to calculate a presumed
adjusted funding target pursuant to § 1.436-1(g)(2)(ii) and an inclusive presumed
AFTAP as described in § 1.436-1(g)(2)(iii). The following example illustrates the
application of the rules described in this A-17:
(a) The facts are the same as in the example in A-14 of this notice. Additionally,
as of January 1, 2020, Plan B has assets of $8,600,000, and a prefunding balance of
$400,000. During the period January 1, 2020, through June 30, 2020, the plan’s
actuary did not certify the plan’s AFTAP for 2020, no contributions were made for 2019,
no § 436 contributions were made, and the plan sponsor made no elections under
§ 430(f). Plan B's sponsor amends the plan to increase benefits effective on July 1,
2020. The amendment would increase Plan B's funding target as of January 1, 2020, by
$500,000.
(b) The determination of whether the amendment is permitted to take effect is
made by applying the rules of § 1.436-1(g)(2) through (4) but substituting the elected
AFTAP of 82% for the presumed AFTAP. Thus, this determination is made based on a
comparison of the presumed adjusted funding target (calculated using an AFTAP of
82%) with the updated interim value of adjusted plan assets.
(c) Plan B's interim value of adjusted plan assets as of the valuation date is
$8,200,000 (that is, $8,600,000 minus the prefunding balance of $400,000). Because
there were no events that must be reflected in an update to the interim value of adjusted
plan assets under the rules of § 1.436-1(g)(2)(iii)(A), the updated interim value of
adjusted plan assets remains $8,200,000. Prior to reflecting the amendment, Plan B's
presumed adjusted funding target as of January 1, 2020, is $10,000,000 ($8,200,000,
divided by the AFTAP of 82%). Increasing Plan B's presumed adjusted funding target by
$500,000 to reflect the amendment results in an inclusive presumed adjusted funding
target of $10,500,00 and would result in an AFTAP of 78% (that is, the updated interim
value of adjusted plan assets as of January 1, 2020, of $8,200,000 divided by the
inclusive presumed adjusted funding target of $10,500,000).

15

(d) Because Plan B's AFTAP was over 80% prior to taking the amendment into
account but would be less than 80% if the amendment were taken into account,
§ 436(c) prohibits the plan amendment from taking effect unless the updated interim
value of adjusted plan assets is increased so that the AFTAP would equal 80%. This
would require an increase of $200,000 (that is, 80% of the presumed adjusted funding
target of $10,500,000 less the interim value of adjusted plan assets of $8,200,000).
Therefore, the plan sponsor may either elect to reduce Plan B’s prefunding balance as
of January 1, 2020, by $200,000, or make a $200,000 § 436 contribution (with interest
to the date of payment) in order to increase the AFTAP to 80% (that is, an updated
interim value of adjusted plan assets as of January 1, 2020, of $8,400,000 divided by
the inclusive presumed adjusted funding target of $10,500,000).
Q-18: Does the AFTAP that applies pursuant to a plan sponsor’s election for a
plan year apply for purposes of the presumptions under § 436(h) used in a subsequent
plan year?
A-18: The AFTAP that applies pursuant to a plan sponsor’s election for a plan
year generally will not apply for purposes of the presumptions under § 436(h) used in a
subsequent plan year. Instead, the actual AFTAP for the plan year that was certified by
the plan’s actuary generally is used for purposes of applying the presumption rules
under § 436(h) for the subsequent plan year.
If, taking into account an election made under § 3608(b) of the CARES Act for a
plan year, no benefit limitation applied to a plan on the last day of the plan year, then
there is no presumption of continued underfunding under § 1.436-1(h)(1) as of the
beginning of the subsequent plan year and the rules of § 1.436-1(g)(3) apply. Under
those rules, no benefit limitation would apply under § 436(d) and (e) during the first
three months of the subsequent plan year. However, under § 1.436-1(g)(3)(ii), the
limitations on unpredictable contingent event benefits and plan amendments that
increase benefit liabilities must be applied during that period, based on the inclusive
presumed adjusted funding target determined using the prior plan year’s certified
AFTAP (as opposed to the AFTAP that applied for that prior plan year pursuant to an
election under § 3608(b) of the CARES Act).
If a benefit limitation applied to a plan on the last day of the plan year for which
an election under § 3608(b) of the CARES Act is made, then the rules providing a
presumption of continued underfunding under § 1.436-1(h)(1) apply. Thus, as of the
beginning of the subsequent plan year, the benefit limitations are applied based on a
presumed AFTAP that is equal to the certified AFTAP for the plan year for which the
election was made (rather than the AFTAP that applied for that plan year pursuant to an
election under § 3608(b) of the CARES Act). This presumed AFTAP is used until the
earliest of the four events specified in § 1.436-1(h)(1)(iv)(A) through (D). See A-14 of
this notice for the rule that treats the plan sponsor’s election under § 3608(b) of the
CARES Act as a certification described in § 1.436-1(h)(1)(iv)(D).

16

Without regard to whether a benefit limitation applied to a plan on the last day of
the plan year for which an election under § 3608(b) of the CARES Act is made, if a
plan’s actuary has not certified an AFTAP for the subsequent plan year before the first
day of the fourth month of that year (and the plan sponsor has not made an election
under § 3608(b) of the CARES Act for that plan year by that date), then the rules under
§ 1.436-1(h)(2) are applied based on the certified AFTAP for the plan year for which the
election was made (rather than the AFTAP that applied for the plan year pursuant to an
election under § 3608(b) of the CARES Act). For example, if for a calendar year plan
year, the plan sponsor made an election under § 3608(b) of the CARES Act to use the
2019 AFTAP of 82% for 2020, but the plan actuary certified the AFTAP for 2020 at 81%,
then under § 1.436-1(h)(2)(i), the plan will be subject to limitations of § 1.436-1(d)(3)
beginning April 1, 2021, based on a presumed AFTAP of 71% for 2020 (the certified
AFTAP for 2020 reduced by 10 percentage points), unless the actuary has certified an
AFTAP for 2021 by that date.
In order to properly reflect § 436(h)(3) in light of the CARES Act, the plan year
following a plan year for which an election under § 3608(b) of the CARES Act is made
must be treated as the first effective plan year, so that the special rule of § 1.4361(h)(2)(ii) applies. Thus, if in the example in the preceding paragraph of this A-18, the
plan’s actuary certified an AFTAP for 2020 of 78%, then beginning April 1, 2021, the
plan will be subject to the limitations of § 1.436-1(d)(3) based on a presumed AFTAP of
68% (the certified AFTAP for 2020 reduced by 10 percentage points), unless the plan’s
actuary has certified an AFTAP for 2021 by that date.
Paperwork Reduction Act
The collections of information contained in this notice have been reviewed and
approved by the Office of Management and Budget in accordance with the Paperwork
Reduction Act (44 U.S.C. § 3507) under control number 1545-2095.
An agency may not conduct or sponsor, and a person is not required to respond
to, a collection of information unless the collection of information displays a valid OMB
control number.
The collections of information in this notice are in A-13 of this notice. The
collections of information are required to implement the application of § 3608 of the
CARES Act. The collections of information are mandatory for those plan sponsors
making an election under § 3608 of the CARES Act.
The likely respondents are sponsors of single-employer defined benefit plans.
Any potential changes on burden will be reported through the renewal of the
current OMB approval numbers.
Estimates of the annualized cost to respondents are not available at this time.

17

Books or records relating to a collection of information must be retained as long
as their contents may become material in the administration of any internal revenue law.
Generally, tax returns and tax return information are confidential, as required by § 6103.
Drafting information
The principal author of this notice is Tom Morgan of the Office of the Associate
Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes).
However, other personnel from the IRS participated in the development of this
guidance. For further information regarding this notice, contact Mr. Morgan or Linda
Marshall at 202-317-6700 (not a toll-free call).

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