In recent years, it has become the norm for the IRS to respond to a federally declared disaster by issuing guidance enabling employers to establish “Leave Donation Programs,” which allow employees to “convert” accrued vacation, sick, or personal leave benefits into an employer-paid monetary donation to a charitable relief organization, without the employee being taxed on the value of donated leave.1 Therefore, it is not surprising, but certainly welcome, that the IRS recently issued Notice 2020-46 (the Notice) to allow employers to adopt the same type of employer-based Leave Donation Programs in response to the COVID-19 pandemic.
The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 created a new type of plan that may begin operating in 2021 called a pooled employer plan (PEP). A PEP is a plan in which multiple unrelated employers will be able to participate. A PEP will have to be maintained by a pooled plan provider (PPP) which must act as a named fiduciary and take on substantially all of the PEP’s administrative duties. Though the statute is fairly detailed, it leaves open a variety of questions, including a number of prohibited transaction issues, that need to be addressed by the Department of Labor (DOL).
For the full alert, visit the Faegre Drinker website.
On June 3, 2020, the Treasury Department issued Notice 2020-42 providing temporary relief from the requirement for a plan representative or notary public to be physically present to witness certain participant elections (including spousal consents), which has been exceptionally difficult to satisfy while following COVID-19 shelter-in-place orders and social distancing guidelines.
In a 5-4 decision in Thole v. U.S. Bank N.A., the Supreme Court found that participants in a defined benefit pension plan lacked Article III standing to sue under the Employee Retirement Income Security Act of 1974 (ERISA) for alleged mismanagement of that plan, finding the plaintiffs suffered no concrete injury that could be redressed by the lawsuit.
Plaintiffs were former employees of U.S. Bank who, having retired as vested participants in its defined benefit plan, had already begun receiving fixed monthly payments. They filed a class action lawsuit under ERISA in 2013 against the plan sponsor and numerous plan fiduciaries, alleging that defendants breached their fiduciary duties by investing plan funds in the investment managers’ mutual funds, paying excessive management fees, and making imprudent investment decisions that led to $750 million in losses to the plan. The trial court dismissed the lawsuit after the plan, which was underfunded when the suit was filed, became overfunded when the company contributed $311 million to bring the plan into compliance, which the court found mooted plaintiffs’ claims. The Eighth Circuit affirmed on the basis that the overfunded nature of the plan removed plaintiffs’ statutory standing under ERISA to sue.