Karen Gelula, Author at Spotlight on Benefits

Rehiring Employees by March 31, 2021 Could Prevent Partial Plan Terminations

The Consolidated Appropriations Act, 2021, enacted on December 27, 2020 (the CAA), includes limited relief pertaining to the partial termination of a qualified retirement plan that may have been inadvertently triggered by employer-initiated severances during the COVID-19 pandemic. Generally, as discussed further in our May 2020 post, the determination as to whether a partial plan termination has occurred depends on the facts and circumstances; however, there is a rebuttable presumption of a partial plan termination if, during the applicable period, the employee turnover rate is at least 20 percent. The employee turnover rate is the number of participating employees who had an employer-initiated severance divided by the total number of participating employees. A partial plan termination triggers 100% vesting for affected participants.

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The Clock Is Ticking: DOL Issued Interim Final Rule on Lifetime Income Disclosures for Defined Contribution Plans

The Setting Every Community Up for Retirement Enhancement (SECURE) Act included several provisions related to lifetime income strategies under retirement plans, including a requirement that pension benefit statements for defined contribution plans disclose the “lifetime income stream equivalent” of each participant’s current account balance – both as a single life annuity (SLA) and as a qualified joint and survivor annuity (QJSA). On August 18, 2020, the Department of Labor (Department) issued an interim final rule implementing this requirement that includes a model disclosure and assumptions for converting benefits (the Rule), and a fact sheet.

As background, under ERISA, administrators of defined contribution plans (such as 401(k) and 403(b) plans) are required to provide pension benefit statements quarterly if the plan allows participant-directed investment, otherwise annually. Among other requirements, the benefit statements must include the participant’s current account balance.

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Temporary Relief from “Physical Presence” Requirement for Participant Elections

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.

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DOL Issues New Rules on Electronic Disclosure

The U.S. Department of Labor (DOL) has issued final regulations that provide an additional safe harbor method of satisfying the ERISA electronic disclosure requirements for retirement plans (note, these rules do not apply to welfare plans). The final regulations will allow employers to post retirement plan disclosures online or deliver them by email.

The new electronic disclosure regulations will be published in the Federal Register on May 27, 2020; for your convenience, we have provided an unpublished copy here.

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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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Normal Cafeteria Plan Mid-Year Election Change Rules Apply – For Now

As of the date of this post, there has been no legislation or IRS guidance allowing plan sponsors to permit cafeteria plan participants to make COVID-19 related mid-year election changes, other than those which also meet the current requirements of the employer’s cafeteria plan and applicable law. However, employers may find themselves faced with an increase in employee requests to change their cafeteria plan elections in response to employees’ rapidly changing circumstances in light of COVID-19.

The table below highlights a few of the mid-year election change requests anticipated as employees and employers respond to the social distancing and economic impact of COVID-19. Plan sponsors should confirm that their plan is not more restrictive than the general mid-year election changes permitted by law which are described here, and as with any mid-year election change request, a change is permitted only when it is consistent with the event and the terms of the plan.

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IRS Says Employer Shared Responsibility Payment Not Subject to Statute of Limitations

The IRS Office of Chief Counsel recently issued a memorandum (https://www.irs.gov/pub/irs-lafa/20200801f.pdf) that responded with a resounding “No” to the question of whether an employer shared responsibility payment (ESRP) imposed under Internal Revenue Code §4980H is subject to any statute of limitations on assessment.

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HIPAA in the Time of Coronavirus