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.
On April 28, 2020, the U.S. Department of Labor (DOL) and the Internal Revenue Service issued a new final rule and additional guidance that together extend numerous deadlines under ERISA and the Internal Revenue Code (Code) that apply to group health plans, retirement plans, and participants in those plans (Extension Guidance). The extensions, which are being enacted in response to the COVID-19 pandemic and pursuant to the authority granted to the DOL by the CARES Act, promise to have a significant impact on employers’ administration of various benefit plan requirements, such as administration of benefit plan claims and appeals, COBRA continuation coverage and mid-year special enrollment in group health plan coverage.
In response to the COVID-19 pandemic, the IRS has issued Notice 2020-23, which automatically extends the deadlines for certain filing obligations that would otherwise be due on or after April 1, 2020, and before July 15, 2020. Since the relief is automatic, no action is needed by plan sponsors to take advantage of the extended deadlines.
As most of the nation continues under lockdown due to the COVID-19 pandemic, we have received inquiries about ways employers can provide additional benefits to employees during this unprecedented time.
On March 13, 2020, the COVID-19 pandemic was declared a “disaster” by President Trump under the Stafford Act. While this designation may not be enough to permit hardship distributions from all retirement plans, the “disaster” declaration under the Stafford Act does trigger availability of Code Section 139 – a little known and seldom used provision in the tax code added after the 9/11 terrorist attacks – that will permit an employer to provide tax-free “qualified disaster relief payments” to employees, if they meet certain requirements. First highlighted by our tax colleagues in a blog post on April 6, 2020, here we expand on how Code Section 139 works for our employer clients considering such a program.
In these difficult times, some employees may want to donate some of their accrued paid-time off, vacation, or leave to help other employees take leave to recover from COVID-19 or to care for family members with COVID-19. This can be accomplished through a “Leave-Sharing Plan” set up by their employer.
Under normal tax rules, the leave donation would have to be treated as an assignment of income that is taxable to the employee donating the leave. However, the IRS allows such a donation to be made on a tax-free basis if it is done pursuant to a Leave-Sharing Plan that meets IRS requirements for a “Medical Leave-Sharing Plan” or a “Major Disaster Leave-Sharing Plan.” Note that in both types of plans, the employee who receives the donated leave will be taxed on the pay for the donated leave.
In this series premiere, Brad Campbell and Sarah Bassler Millar discuss the evolution of ERISA over the last 45 years, efforts at the Federal and State levels to increase participation in retirement savings plans, potential changes in legislation and what to expect from regulatory agencies in the coming years.
The DOL’s newly released final regulation on “Association Retirement Plans” (ARPs) will make it easier for groups and associations of employers to jointly sponsor a combined 401(k) or other defined contribution plan. (These plans are also referred to as multiple employer plans or “MEPs.”) In recent years, there has been a push to permit service providers to create “Open MEPs,” which are plans of unrelated employers having no business connection, or what the DOL refers to as “commonality” (i.e., a relationship unrelated to employee benefits). The hope is that these plans will provide small businesses with a cost-efficient and minimally burdensome avenue for offering retirement savings opportunities to workers.
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