In recent years, it has become the norm for the IRS to respond to a federally declared disaster by issuing guidance enabling employers to establish “Leave Donation Programs,” which allow employees to “convert” accrued vacation, sick, or personal leave benefits into an employer-paid monetary donation to a charitable relief organization, without the employee being taxed on the value of donated leave.1 Therefore, it is not surprising, but certainly welcome, that the IRS recently issued Notice 2020-46 (the Notice) to allow employers to adopt the same type of employer-based Leave Donation Programs in response to the COVID-19 pandemic.
Department of Labor Publishes Request for Information on Pooled Employer Plans
The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 created a new type of plan that may begin operating in 2021 called a pooled employer plan (PEP). A PEP is a plan in which multiple unrelated employers will be able to participate. A PEP will have to be maintained by a pooled plan provider (PPP) which must act as a named fiduciary and take on substantially all of the PEP’s administrative duties. Though the statute is fairly detailed, it leaves open a variety of questions, including a number of prohibited transaction issues, that need to be addressed by the Department of Labor (DOL).
For the full alert, visit the Faegre Drinker website.
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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Split Supreme Court Awards U.S. Bank a Win in ERISA Pension Lawsuit
In a 5-4 decision in Thole v. U.S. Bank N.A., the Supreme Court found that participants in a defined benefit pension plan lacked Article III standing to sue under the Employee Retirement Income Security Act of 1974 (ERISA) for alleged mismanagement of that plan, finding the plaintiffs suffered no concrete injury that could be redressed by the lawsuit.
Plaintiffs were former employees of U.S. Bank who, having retired as vested participants in its defined benefit plan, had already begun receiving fixed monthly payments. They filed a class action lawsuit under ERISA in 2013 against the plan sponsor and numerous plan fiduciaries, alleging that defendants breached their fiduciary duties by investing plan funds in the investment managers’ mutual funds, paying excessive management fees, and making imprudent investment decisions that led to $750 million in losses to the plan. The trial court dismissed the lawsuit after the plan, which was underfunded when the suit was filed, became overfunded when the company contributed $311 million to bring the plan into compliance, which the court found mooted plaintiffs’ claims. The Eighth Circuit affirmed on the basis that the overfunded nature of the plan removed plaintiffs’ statutory standing under ERISA to sue.
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Preventing an ERISA Litigation Outbreak After COVID-19 – Part 2: Cybertheft of 401(k) Plan Distributions
To address growing concerns over an increase in ERISA litigation claims related to the COVID-19 pandemic, Faegre Drinker’s ERISA litigation team developed the “Preventing an ERISA Litigation Outbreak After COVID-19” alert series to help clients navigate the fiduciary and plan liability issues associated with COVID-19. Part Two of our series examines the potential for fraudulent 401(k) distributions as an unexpected result of the Coronavirus Aid, Relief and Security Act (CARES Act), and highlights steps plan sponsors and recordkeepers can take to mitigate the risk of these cybercrimes.
View Part One of this series, which provides guidance to assist ESOP fiduciaries in carrying out their duties during the pandemic.
New DOL Electronic Disclosure Rules – What You Need to Know
The Department of Labor (DOL) issued final electronic disclosure rules for retirement plans on May 27, 2020 (2020 Safe Harbor). We are already fielding questions about these new rules and have provided answers here to some of the common questions we are hearing from clients.
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COVID-19 Joint Agency Relief Part 3: COBRA and Special Enrollment Extensions
In light of the COVID-19 pandemic, the federal government recently issued guidance extending various benefits-related deadlines. The guidance includes a Notification of Relief that essentially tolls the timeframes associated with various rights until after the COVID-19 National Emergency. In this alert, we focus on what the tolling means with respect to plan sponsor obligations and participant rights under the Consolidated Omnibus Budget Reconciliation Act (COBRA) and the Health Insurance Portability and Accountability Act (HIPAA) special enrollment provisions.
For the full alert, visit the Faegre Drinker website.
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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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).
COVID-19 Joint Agency Relief Part 2: Guidance for Implementing Claim-Related Deadline Extensions
As described in our May 1 blog post, in response to the COVID-19 pandemic, the Employee Benefits Security Administration, the Department of Labor (DOL), and the Internal Revenue Service, the Department of the Treasury (Agencies) recently issued guidance (Extension Guidance) providing emergency relief to employee benefit plans, participants, and beneficiaries for complying with certain deadline and notice requirements under the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code. As part of this guidance, the Agencies released a notification of relief (Joint Notice), which significantly affects administration of all ERISA-governed health, welfare and retirement plans by tolling certain claim-related deadlines throughout the duration of the National Emergency declared by President Trump. This alert, which can be read in its entirety on the Faegre Drinker website, describes the impact of those deadline extensions and provides practical guidance for plan sponsors and fiduciaries to consider in complying with the Joint Notice. For analysis of the Extension Guidance’s implications on retirement plans, see part one of this series of alerts.