Author: Monica Novak

Monica Novak counsels tax-exempt and for-profit clients on the complex and diverse array of statutes and regulations that apply to employee benefit plans and executive compensation arrangements. She provides guidance and support in designing compliant benefit programs, and assists clients with corrective actions when appropriate to ensure ongoing legal compliance. Monica also represents clients in negotiating stock and asset purchase agreements and merger agreements, resolving potential benefit plan liabilities and integrating benefit plans in the aftermath of acquisitions.

Final Regulations Issued on Required Minimum Distributions Under SECURE Act

The Internal Revenue Service (IRS) has issued final regulations for required minimum distributions (RMDs) from certain retirement plans, including tax-qualified plans, Internal Revenue Code (Code) section 403(b) plans, individual retirement accounts (IRAs) and Code section 457(b) eligible deferred compensation plans. The regulations implement changes put into law by the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) and the SECURE 2.0 Act of 2022 (SECURE 2.0).

The final regulations apply for distribution calendar years beginning on or after January 1, 2025. However, as some of the RMD changes addressed in the final regulations already have taken effect in accordance with the effective dates set forth in the SECURE Act and SECURE 2.0, plan sponsors should review current plan operations for compliance.

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Plan Fiduciaries Continue to Defeat BlackRock Target Date Fund Class Actions

A series of cases against fiduciaries of 401(k) plans that offer BlackRock Target Date Funds (TDFs) have been dismissed by district courts in recent months. In three recent cases, the district courts held that plaintiffs failed to allege any facts about the plan fiduciaries’ process for selecting and monitoring the BlackRock TDFs and that plaintiffs’ reliance on the BlackRock TDFs’ alleged underperformance alone was insufficient to state a claim for breach of fiduciary duty.

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Relief All Around: IRS Expands Required Plan Amendment Deadline Extensions

On September 26, 2022, the IRS published Notice 2022-45, extending the deadline for required retirement plan amendments associated with qualifying coronavirus-related and disaster-relief distributions under Section 2202 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and Section 302 of Title III of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act).

Notice 2022-45 follows Notice 2022-33, released in August, which extended the deadline for plan amendments under Section 2203 the CARES Act, the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), and Section 104 of the Bipartisan American Miners Act of 2019 (Miners Act). Information on Notice 2022-33 can be found here.

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Federal District Court Invalidates Some Surprise Billing Rules: What It Means for the No Surprises Act

On February 23, 2022, the United States District Court for the Eastern District of Texas invalidated portions of Part II of the interim final rule (“IFR”) issued by the U.S. Departments of Health and Human Services, Labor, and Treasury (“Tri-Agencies”), implementing the dispute resolution provisions of the No Surprises Act (“NSA”). While the ruling in the case, Texas Medical Association v. U.S. Department of Health & Human Services, may impact medical plan costs, it does not substantively affect the consumer protections against surprise medical billing added by the NSA, which took effect in 2022.

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Last Call: Don’t Forget Your Retirement Plan’s Required Year-End Amendments for 2021

As 2021 winds down, retirement plan sponsors should confirm that their plan documents are amended by December 31, 2021, to comply with certain plan changes:

Hardship Distributions. 401(k) plans and 403(b) plans must be amended, as applicable, to comply with the final regulations updating the hardship distribution rules. For hardship distributions made on or after January 1, 2020, plans must be amended by December 31, 2021, to: (i) eliminate the suspension of elective deferrals following a hardship distribution; and (ii) require employees requesting hardship distributions to represent that they have insufficient cash or other liquid assets reasonably available to satisfy the need.Additionally, plans that made changes to their hardship distribution provisions that were (i) permitted under the regulations, and/or (ii) took effect on or before January 1, 2020 (such as eliminating the requirement to exhaust all available loans before taking a hardship distribution, or permitting amounts contributed as qualified nonelective contributions (QNECs) or qualified matching contributions (QMACs) and earnings to be made available for hardship distributions), must adopt such changes by December 31, 2021.
PBGC Rates. Defined benefit plans that refer to the Pension Benefit Guaranty Corporation (PBGC) immediate rate may need to be amended to reflect that the PBGC stopped publishing monthly rates at the end of 2020. Such amendment would need to be effective January 1, 2021 (which, for calendar year plans, would require adoption of an amendment by December 31, 2021).
Collectively Bargained Cash Balance/Hybrid Defined Benefit Plans. Cash balance/hybrid defined benefit plans maintained pursuant to a collective bargaining agreement ratified on or before November 13, 2015 must be amended by December 31, 2021, to comply with requirements regarding market rate of return and other cash balance/hybrid plan requirements that first applied to such plans generally on or after January 1, 2017.
Discretionary Amendments. If a retirement plan implements discretionary changes during the 2021 plan year, retirement plan sponsors must adopt an amendment to that effect by the last day of the 2021 plan year (December 31, 2021, for a calendar year plan).

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Employers – Check Your Severance Arrangements Now!

If employees are required to provide proof of COVID-19 vaccination or a timely negative COVID-19 test, and/or wear a mask as a condition of employment (COVID-19 Policies), and an employee is terminated for violating a COVID-19 Policy, will that employee be entitled to severance benefits?

The answer depends on what the employer intends and the terms of the applicable severance arrangement which, for example, can be in the form of a severance plan, a severance agreement, or an employment agreement.

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Disclosure of Claims-Related Audio Recordings

Claims-related audio recordings may need to be disclosed to claimants upon request, according to an information letter dated June 14, 2021 (“Information Letter”), issued by the Department of Labor’s (“DOL”) Employee Benefits Security Administration (“EBSA”). Although DOL information letters are not binding, as a result of the Information Letter, claimants may start to request audio recordings of conversations relating to benefit denials. Plan sponsors and claims administrators should be prepared for these requests and should train personnel handling telephone calls with claimants accordingly.

The Information Letter addresses whether ERISA and DOL claims procedures regulations thereunder require a plan fiduciary to provide, upon a claimant’s request, a copy of an audio recording and transcript of a telephone conversation between the claimant and a representative of the plan’s insurer regarding a benefit denial. The request at issue in the Information Letter was denied by the claims administrator on the basis that “recordings are for ‘quality assurance purposes,’” and “are not created, maintained, or relied upon for claim administration purposes, and therefore are not part of the administrative record.” The claims administrator maintained that the actual recording is distinct from the notes made available to the claimant, which contemporaneously documented the content of the recorded conversation, and which became part of the “claim activity history through which [the insurer] develops, tracks and administers the claim.”

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DOL Issues Model COBRA Subsidy Notices and Initial Guidance on COBRA Subsidy Relief under the American Rescue Plan Act of 2021

As discussed in our prior blog post, the American Rescue Plan Act of 2021 (ARP) requires employers that sponsor group health plans to provide a 100% COBRA subsidy for “Assistance Eligible Individuals” during the “Subsidy Period” (April 1 through September 30, 2021, or the date the participant is no longer an Assistance Eligible Individual, if earlier) and to offer a COBRA special election opportunity for certain individuals to enroll in COBRA coverage in order to receive the benefit of the COBRA subsidy.

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Upcoming Webinar | Checking the Lost & Found for Missing Participants: What Plan Sponsors Need to Be Doing!

In response to ongoing requests by plan sponsors, service providers and industry associations alike, the Department of Labor (DOL) issued informal, legally nonbinding guidance earlier this year to help address issues surrounding missing retirement plan participants. Join members of Faegre Drinker’s benefits and executive compensation group on April 14 from 11:00 – Noon CT, as we explore best practices for plan sponsors to identify missing and nonresponsive plan participants, as well as potential approaches to facilitate compliance and mitigate risk of penalties.

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Departments Release FAQs on Implementing the Mental Health and Substance Use Disorder Parity Requirements under the Consolidated Appropriations Act

As described in a recent blog post, the Consolidated Appropriations Act, 2021 amended the Mental Health Parity and Addiction Equity Act (MHPAEA) to require group health plans and health insurance issuers (collectively, “group health plans”) that impose non-quantitative treatment limitations (NQTLs) on mental health or substance use disorder (MH/SUD) benefits to perform and document comparative analyses, in order to demonstrate that such NQTLs comply with the requirements of the MHPAEA¹. This requirement became effective on February 10, 2021, along with the requirement that a group health plan must provide the comparative analyses to the Department of Labor (DOL), Health and Human Services (HHS), or applicable State authority upon request.

The Consolidated Appropriations Act also directed the DOL, HHS, and the Treasury (together, the “Departments”) to issue additional guidance for group health plans, intended to clarify and provide examples of methods group health plans may implement to comply with the comparative analyses and disclosure obligations.

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