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”
IRS Extends Filing Deadlines for Employee Benefit Plans
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.
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FAQs on COVID-19 Group Health Plan Coverage Implementation
The Department of Labor (DOL), the Department of Health and Human Services (HHS), and the Department of the Treasury (collectively, “the Departments”) issued Frequently Asked Questions for health plans implementing coverage changes under the Families First Coronavirus Response Act (Families First Act) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
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Audiocast – Navigating Employee Benefits in an Evolving COVID-19 Pandemic
Faegre Drinker and Multnomah Group held a roundtable discussion designed to provide practical advice on navigating employee benefits during the COVID-19 pandemic. Employers are dealing with remote work, layoffs, reduced hours, as well as determining how these changes will impact the operations of their employee benefit plans. Furthermore, with the passage of recent legislation such as the Families First Coronavirus Response Act and potential passage of the Coronavirus Aid, Relief and Economic Security Act, employers are faced with more challenges and changes.
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Code Section 139: Little Known Disaster Relief Benefits Now in the Spotlight
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.
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Calculating Plan Loan Limits under the CARES Act: Application of the One-Year Lookback
The Coronavirus Aid, Relief, and. Economic Security (CARES) Act temporarily increases the plan loan limit for loans to qualified individuals (as defined below) from defined contribution plans, such as 401(k) plans and 403(b) plans. This is generally good news for employees, but care should be taken when plan sponsors and plan recordkeepers calculate the loan limit because the one-year “lookback” continues to apply.
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).
Continue reading “CARES Act Brings Much-Needed Relief (and New Obligations) for Benefit Plans”
Beware the Snake in the Grass: COBRA Election Notice Considerations During The COVID-19 Pandemic
With most of the nation on lockdown due to the COVID-19 pandemic, many employers are in the unfortunate position of having to lay off workers or significantly reduce their hours. If these workers also lose employer-sponsored health coverage, they will experience a “qualifying event” under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), triggering the requirement to send COBRA election notices describing the employee’s (and spouse’s) right to elect to temporarily stay on their employer’s health plan. In these difficult times, employers should review their notices to ensure they are compliant with COBRA and provide adequate information to employees. Compliance is especially important because COBRA notices have become the subject of a growing trend of class action lawsuits filed by ex-employees alleging that their former employers did not provide sufficient notice of their COBRA rights.
Generally, COBRA requires notices to be drafted in a manner that the average plan participant can understand, and must provide specifics about continuation coverage, such as the contact information for the administrator, how to elect coverage, and how much coverage costs. The DOL has issued model notice letters to help employers meet these requirements.
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).
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.