IRS Increases the Health FSA Carryover Limit and Addresses Premium Reimbursement under ICHRAs

On May 12, 2020, the Internal Revenue Service (IRS) issued Notice 2020-33 (the Notice), which increases the maximum health flexible spending account (FSA) carryover limit. The Notice also addresses a gap in existing guidance related to reimbursement of individual insurance premiums by an individual coverage health reimbursement arrangement (ICHRA). Along with the Notice, the IRS also issued Notice 2020-29 to provide temporary relief related to the cafeteria plan mid-year change in status rules (Notice 2020-29 is discussed in our earlier blog post, here).

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IRS Issues Welcome Guidance on Mid-Year Cafeteria Plan Election Changes and Other Health & Welfare Matters

On May 12, 2020, the Internal Revenue Service (IRS) issued Notice 2020-29 (the Notice), an important piece of guidance for employers that sponsor health & welfare plans.

The Notice provides much-needed flexibility for employers who are dealing with unexpected requests and circumstances as a result of the 2019-nCoV (COVID-19) pandemic. As discussed below, the Notice permits – but does not require – cafeteria plans to provide additional opportunities for mid-year election changes for health coverage, health flexible spending account (health FSA) coverage and dependent care FSA (dependent care FSA) coverage. It also permits plans to extend the claims periods for health FSA and dependent care FSA expense reimbursement, and it clarifies earlier guidance regarding coverage of telehealth and COVID-19-related items under a high deductible health plan (HDHP).

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COVID-19 Joint Agency Relief Part 1: ERISA Enforcement Relief for Retirement Plans

As described in our May 1 blog post, the Department of Labor (DOL) and the Internal Revenue Service (IRS) recently issued guidance (the “Extension Guidance”) providing relief to benefit plan sponsors and participants for complying with certain deadline and notice requirements under ERISA and the Internal Revenue Code (“Code”). One piece of the Extension Guidance, EBSA Disaster Relief Notice 2020-01 (the “Notice”) focuses specifically on ERISA retirement plan obligations, including ERISA-required notices, ERISA rules for retirement plan loans, and ERISA timing requirements for remitting participant contributions to retirement plan trusts. This alert describes in more detail the relief in the Notice and implications for plan sponsors.

For the full alert, visit the Faegre Drinker website.

Cutting Costs in a COVID-19 World – Reducing or Suspending Company Contributions to a 401(k) or 403(b) Plan

In response to the current economic crisis caused by COVID-19, many companies are considering cost-savings measures to improve their companies’ financial stability. One such cost-saving option is the reduction or suspension of company contributions to a company’s 401(k) or 403(b) plan. The procedure for and the implications of such suspension will depend on the plan terms, including whether the contribution is intended to be a “safe harbor” contribution. Continue reading “Cutting Costs in a COVID-19 World – Reducing or Suspending Company Contributions to a 401(k) or 403(b) Plan”

CARES Act Brings Much-Needed Relief (and New Obligations) for Benefit Plans

As people across the country react to the quickly changing COVID-19 pandemic, Congress passed another piece of legislation providing guidance and relief on a variety of issues — the Coronavirus Aid Relief and Economic Security (CARES) Act, signed into law on March 27, 2020. This article includes brief summaries of what employers should know about key benefits-related components of the CARES Act. Plan sponsors should review their plans to assess the impact of these changes and take appropriate steps to implement the changes (some of which are required).

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Benefit Plan FAQs on COVID-19 Part 5

Hardship Distributions During the COVID-19 Outbreak

As the COVID-19 outbreak continues, retirement plan sponsors will likely receive questions from employees about ways in which they can access funds in their retirement plan accounts. While we wait for any potential Congressional action to ease access to retirement plan accounts, we look to the hardship distribution rules that apply now regardless of Congressional relief. Hardship distributions are one way an employee can receive an in-service distribution of elective deferral contributions (and, depending on the plan provisions, other types of contributions) from their accounts, provided the employee has an immediate and heavy financial need and the distribution is necessary to meet that need.

The IRS’s recently issued final regulations added a new type of safe harbor hardship distribution event, for losses related to a federally-declared disaster. Under the final regulations, an employee may be deemed to have an immediate and heavy financial need when the employee incurs expenses and losses (including loss of income) as a result of a disaster declared by the Federal Emergency Management Agency (“FEMA”), provided the employee’s principal residence or principal place of employment at the time of the disaster was located in an area designated by FEMA for individual assistance with respect to the particular disaster. Historically, the IRS announced similar relief on a piecemeal basis (for example, allowing certain hardship distributions for Hurricane Maria and the California wildfires in 2017).

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Benefit Plan FAQs on COVID-19 Part 4

HIPAA in the Time of Coronavirus

Group health plans and other entities covered by the Health Insurance Portability and Accountability Act of 1996 (HIPPA) should consider the bulletin released by the Department of Health and Human Services (Bulletin) as a reminder that their HIPAA obligations continue to apply even during a public health emergency, such as the Novel Coronavirus Disease (COVID-19) outbreak.

The Bulletin reiterates the circumstances under which HIPAA currently permits an individual’s protected health information (PHI) to be used and disclosed in an emergency situation and those circumstances applicable to group health plans are generally discussed below. Plan sponsors may want to review their group health plan’s use and disclosure procedures to confirm these permitted exceptions are correctly included.

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Now Hear This: California Enacts FSA Notice Requirement

A new California law requires California employers to notify employees who participate in a flexible spending account (FSA) and work in California of any deadlines applicable to withdrawing funds from their FSA before the end of the year. This includes health care FSAs, dependent care FSAs and adoption assistance FSAs.

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The Future of Retirement Plan Disclosures?

On October 23, 2019, the Department of Labor (DOL) published a proposed rule that would ease retirement plan administration by allowing broader use of electronic disclosure. This proposed rule was foreshadowed by an Executive Order issued in August 2018 directing the DOL to review actions that could be taken to improve the effectiveness of retirement plan disclosures under ERISA and to reduce the costs to employers.

Currently, plan sponsors can rely on a 2002 safe harbor for electronic delivery of documents and other information required under ERISA. However, the 2002 safe harbor is limited; notice can be provided electronically only to participants and beneficiaries who either (1) have work-related computer access or (2) provide affirmative consent to receive documents electronically (in addition to meeting certain other requirements). Anyone not falling within one of those categories must receive a hard copy.

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Participant Data as a Plan Asset: Lessons Learned from Recent Class Action

In several recent ERISA plan lawsuits, plaintiffs have alleged that the plan fiduciary breached its fiduciary duties under ERISA with respect to participant data (e.g., participants’ ages, choice of investments, asset size, etc.), arguing that such participant data is a “plan asset” that the plan fiduciary failed to safeguard. Although ERISA does not specifically address whether participant data is a plan asset, the settlements reached in those lawsuits reveal an emerging trend that plan sponsors need to consider.

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