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.
Continue reading “Biden Administration Permits Trump-Era Investment Advice Exemption, Rollover Guidance, to Come Into Effect”
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.
Continue reading “PBGC Publishes Final Rule Allowing Simplified Withdrawal Liability Calculations Applicable to Benefit Reductions, Benefit Suspensions and Contributions”
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.
Continue reading “Supreme Court Decision Caps Big Week in Litigation for Pharmacy Benefit Managers”
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.
Continue reading “Tenth Circuit Interpretation of ERISA Notice Requirement Impacts Plan Administrator’s Right to Deferential Standard of Review”
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.
Continue reading “IRS Issues New Guidance for Mid-Year Changes to Safe Harbor 401(k) and 403(b) Plans”
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.
Continue reading “IRS Releases Coronavirus-Related FAQs for Retirement Plans and IRAs – Some Guidance Still Forthcoming”
With most of the nation on lockdown due to the COVID-19 pandemic, many employers are in the unfortunate position of having to lay off workers or significantly reduce their hours. If these workers also lose employer-sponsored health coverage, they will experience a “qualifying event” under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), triggering the requirement to send COBRA election notices describing the employee’s (and spouse’s) right to elect to temporarily stay on their employer’s health plan. In these difficult times, employers should review their notices to ensure they are compliant with COBRA and provide adequate information to employees. Compliance is especially important because COBRA notices have become the subject of a growing trend of class action lawsuits filed by ex-employees alleging that their former employers did not provide sufficient notice of their COBRA rights.
Generally, COBRA requires notices to be drafted in a manner that the average plan participant can understand, and must provide specifics about continuation coverage, such as the contact information for the administrator, how to elect coverage, and how much coverage costs. The DOL has issued model notice letters to help employers meet these requirements.
Continue reading “Beware the Snake in the Grass: COBRA Election Notice Considerations During The COVID-19 Pandemic”
After a delay of several months, Congress passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act, clearing the way for one of the most substantial pieces of retirement plan legislation in years to become law.
The House of Representatives initially passed the SECURE Act in May by an overwhelming 417−3 vote. Although the Act was set for easy bipartisan passage, it foundered in the Senate. The bill found new life at the eleventh hour of the 2019 legislative session as an attachment to the must-pass $1.4 trillion spending bill, which passed by significant margins.
Continue reading “Congress (Finally) Passes the SECURE Act”
The American Arbitration Association (AAA) significantly altered its rules for multiemployer pension plan arbitrations to respond to Pension Benefit Guaranty Board (PBGC) concerns and public comments regarding recent fee increases and the selection of arbitrators. Today, the PBGC published a Notice of Approval of AAA’s application of its amended rules. Click here for our alert on the changes, which discusses the welcome relief these amended rules provide employers who wish to challenge withdrawal liability assessments and the impact on arbitrating assessments between multiemployer plans and employers.