The IRS recently issued Notice 2021-40, providing a one-year extension through June 30, 2022, of the temporary relief from the physical presence requirement for certain plan elections (including spousal consents) required to be witnessed by a plan representative or notary public. Issued in response to the COVID-19 pandemic, the IRS provided initial relief from the physical presence requirement for the period beginning January 1, 2020 and ending December 1, 2020, and then provided initial extended relief through June 30, 2021.
President Biden signed an executive order on May 20 on climate-related financial risk that seeks to change the rules regarding the use of environmental, social, and governance (ESG) investments in retirement plans. The order specifically directs the Employee Benefits Security Administration (EBSA) bureau of the Department of Labor (DOL) to consider suspending, revising, or rescinding the Trump-era “Financial Factors in Selective Plan Investments” rule regarding ESG retirement investments. The executive order is consistent with the expectation that the Biden administration will move to encourage the consideration of ESG factors when selecting retirement plan investments given the emphasis on climate change initiatives.
On May 4, 2021, the United States District Court for the Eastern District of Michigan granted in part and denied in part a motion to dismiss in a class action lawsuit regarding the adequate notice of the right to continued insurance coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). The decision follows a blitz of class action lawsuits alleging deficient COBRA notices and underscores the importance of careful review by employers.
The $1.9 trillion COVID stimulus package recently signed into law by President Biden includes significant assistance for pension plans. The financial assistance provisions will have a large bearing on shoring up the ongoing multiemployer pension crisis. The pension assistance has not received as much press as have other provisions of the American Rescue Plan Act of 2021 (ARPA) but it is no less impactful. The stimulus package provides direct financial support for certain underfunded multiemployer pension plans and relief from several minimum funding rules for both multiemployer and single-employer plans.
The pension provisions of ARPA are a modified version of the Butch Lewis Act, a pension rescue bill that has passed in the House but never in the Senate in years past. ARPA should allow over 100 severely underfunded multiemployer pension plans to return to relative financial health; however, ARPA does not provide for any long-term funding reform that would prevent another pension crisis. It also will have little or no effect for contributing employers.
Continue reading “$1.9 Trillion American Rescue Package Includes Major Relief for Single and Multiemployer Pension Plans”
The Department of Labor issued a press release on February 12 confirming that Prohibited Transaction Exemption 2020-02, titled “Improving Investment Advice for Workers & Retirees” (the “Exemption”), would go into effect as scheduled. The Exemption was finalized and published by the Trump administration in December 2020, and came into effect on February 16.
The newly available Exemption is intended to fill a void left by the loss of the “Best Interest Contract” or “BIC” Exemption, which was struck down along with the rest of the Obama-era Fiduciary Rule in a March 2018 Fifth Circuit ruling.
On Friday January 8, the Pension Benefit Guaranty Corporation (PBGC) published a final rule that provides multiemployer pension plans with additional methods to help calculate employer withdrawal liability. The rule includes relatively simplified approaches to calculating withdrawal liability that multiemployer plans may choose to use. The rule comes into effect on Friday, January 7, 2022, 30 days after its publication in the Federal Register. The final rule reflects changes based on several comments made to the proposed rule that was published on February 6, 2019.
The Employee Retirement Income Security Act (ERISA) charges the PBGC with oversight of multiemployer pension plans, including employer withdrawal liability. Multiemployer plans and their actuaries do not have free reign to calculate withdrawal liability as they see fit. Rather, they must follow the provisions and approved methods set forth in ERISA and as published by the PBGC. The new rule stems from amendments to the ERISA funding rules implemented by Congress in 2006 under the Pension Protection Act (“PPA”) and in 2014 under the Multiemployer Pension Reform Act (“MPRA”). The funding rules permitted financially distressed multiemployer plans to reduce adjustable benefits, suspend a portion of nonforfeitable benefits, and impose contribution increases and surcharges for underfunded plans. These funding rules clarified whether plans could take these changes into account when determining withdrawal liability and instructed the PBGC to draft simplified methods to do so.
The U.S. Supreme Court handed down a decision on Thursday of last week that will impact state-level regulation of pharmacy benefit managers (PBMs) by holding that an Arkansas law regulating PBMs was not preempted by the Employee Retirement Income Security Act (ERISA). The decision capped off a busy week in litigation for PBMs as on Monday the Second Circuit held that a business transaction between a PBM and an insurer was not a fiduciary act under ERISA. Although the cases involve distinct issues, they provide some clarity for PBMs on the interplay between business decisions and litigation risks, and some expectation for future regulation at the state-level.
When an ERISA plan delegates authority to the plan administrator to interpret the plan documents for benefit determinations, the plan administrator typically is entitled to a deferential standard of judicial review, and courts will look for abuse of discretion rather than impose a de novo standard of review. In Lyn M. v. Premera Blue Cross, – F.3d –, 2020 WL 4249129 (10th Cir. Jul 24, 2020), the U.S. Court of Appeals for the Tenth Circuit limited the deferential standard of review, holding that a de novo review applied when the plan administrator did not adequately disclose to the plan participants the instrument delegating discretionary authority to the plan administrator.
On June 29, 2020, the IRS issued Notice 2020-52 addressing mid-year reductions and suspensions of contributions to Safe Harbor 401(k) and 403(b) plans. In response to the COVID-19 pandemic, the Notice provides some temporary relief for plan sponsors that wish to reduce or eliminate safe harbor contributions mid-year.
On March 27, Congress enacted the Coronavirus Aid, Relief and Economic Security (CARES) Act, a massive stimulus package in response to the global coronavirus pandemic. Section 2202 of the CARES Act provides certain individuals who are affected by the pandemic – referred to as “qualified individuals” – with special distribution options from 401(k), 403(b) and governmental 457(b) plans and IRAs, and expands permissible retirement plan loans.
On Monday, May 4, the Internal Revenue Service published answers to commonly asked questions regarding section 2202.