New Electronic Delivery Option for ERISA Retirement Plan Information

Businessman workingThere is a new electronic delivery option for retirement plan sponsors who are looking for an easier and more efficient means of providing required plan information disclosures to plan participants and beneficiaries. Retirement plan administrators can now electronically notify participants and beneficiaries that certain disclosures are available on a specified website. In addition, retirement plan administrators can more easily directly deliver the disclosures by email. Participants and beneficiaries must be able to opt out of electronic delivery and to request paper copies of disclosures without cost. Notably, the new option is not approved for delivery of health and welfare plan disclosures at this time.

Background. Current rules for electronic delivery of documents date back to 2002, and many employers have found them difficult to utilize.

The 2002 rules allow employers to use electronic delivery only for employees who (a) are “wired at work” (i.e., those who could access electronic disclosures at their job sites and who utilized their employers’ electronic information systems as an integral part of their jobs), or (b) affirmatively consent to receive documents electronically. The consent requirements are difficult because they require advance disclosure and identification of all documents and identification of necessary hardware and software requirements. In addition, the consent must be updated if hardware and software requirements change. Continue Reading

Member Communications: Radio Ga Ga or Radio Silence?

Talk Radio Computer On Air Microphone Talker

On 29 April 2020, the Pensions Regulator (TPR) published guidance on communicating to members during the Coronavirus Disease (COVID-19) outbreak. TPR is placing the burden on pension plan trustees to discourage members from making rash decisions in relation to their pension savings that could have long-term effects. It will be interesting to see how The Pensions Ombudsman interprets the extent of this duty in due course.

The guidance highlights the importance of members being able to access member services and contact the scheme if they have any queries. TPR also stresses that where there are any delays or disruptions to services, members should be kept informed. Clearly trustees need to respond to member requests – however, it does not necessarily follow that a general mailing is appropriate at this time. There is a widespread concern that communicating with members during a financial crisis may actually encourage them to think about their pension options, when they might otherwise have left their savings well alone. We urge trustees to consider the best approach for their scheme – this could be a general broadcast or radio silence.  Continue Reading

COVID-19 Relief for Employee Benefit Plan Deadlines

The U.S. Department of Labor (DOL) recently announced deadline relief for employee benefit plan notices, disclosures or document deadlines that must be furnished between March 1, 2020 and 60 days after the announced end of the COVID-19 National Emergency (“Outbreak Period”), if the employee benefit plan and responsible fiduciary act in good faith and furnish the notice, disclosure, or document as soon as administratively practicable under the circumstances.  In addition, the relief set forth a guiding principle for plan fiduciaries: plans “should make reasonable accommodations to prevent the loss of benefits or undue delay in benefit payments and should attempt to minimize the possibility of losing benefits because of a failure to comply with pre-established timeframes.”

The guidance, Disaster Relief Notice 2020-21, issued by DOL’s Employee Benefits Security Administration (“EBSA”) on April 28, 2020, was closely followed by a final regulation, issued jointly by DOL and the Internal Revenue Service (“IRS”), extending timeframes a variety of requirements under the Employee Retirement Income Security Act (“ERISA”) and the Internal Revenue Code (the “Code”).  The Final Rule, for Extension of Timeframes, was published in the Federal Register on May 4, 2020.

Forwarding Participant Contributions and Wage Withholding to Retirement Plans.  During the Outbreak Period, employers will be relieved of the obligation to transfer participant contributions and wage withholdings within the existing timeframes (by the earliest date that they can be segregated from general assets but in no later than the 15th day of the month following the month in which the amounts withheld from the participant wages) as long as they act in good faith and forward these amounts as soon as administratively practicable under the circumstances.

COBRA.  COBRA premium payments, generally required to be paid within 30 days of their due date, will be treated as timely if made within 30 days following the end of the Outbreak Period.  The Outbreak Period also will be disregarded with respect to the 60-day period that individuals who have lost health care coverage are given to elect continuation coverage under COBRA, the deadline for individuals to notify their plans of a determination of disability or COBRA qualifying event, and the date by which health plans, sponsors or administrators must provide COBRA election notices.

The extended deadlines for electing COBRA coverage and paying COBRA premiums appear to give individuals the flexibility to evaluate whether COBRA coverage is desirable (and affordable) after the end of the National Emergency and to elect and pay for coverage retroactively at that time.  The package of COBRA deadline relief may reduce – or complicate – the tide of COBRA litigation that some expect to result from the enormous number of coronavirus-related layoffs.

Special Enrollment Rights. The same flexibility applies to individuals who have lost health care eligibility or have become a dependent of an employee based on birth, marriage or adoption.  These individuals generally are permitted to enroll in health care coverage for which they are otherwise eligible outside of the regular enrollment period if they elect to do so within 30 days (or in some cases 60 days) of losing coverage.  With the relief provided, this decision (and, in theory, the accompanying payment) need not be made until after 30 (or 60) days after the Outbreak Period.

Benefit Claims.  Deadlines for benefit claims, appeals of adverse decisions, and requests for external reviews of decisions will be delayed so that they need not be filed until the end of the Outbreak Period.

Notices and Disclosures Delays in furnishing notices, disclosures or other documents required under Title I of ERISA or blackout period notices due during the Outbreak Period will not be treated as ERISA violations if they are furnished as soon as administratively practicable under the circumstances.

DOL Conformity with CARES Act and Other GuidanceNotice 2020-21 provides ERISA relief with respect to the plan loans and Form 5500 filings to conform to the measures under the Internal Revenue Code enacted by the CARES Act. It also extends relief to Form M-1 filing deadlines for multiple employer welfare arrangements.

IRS Guidance Provides Employers with the ability to offer A Second Open Enrollment Period for the 2020 Plan Year and Provides Greater Flexibility for Making Mid-Year Cafeteria Plan Elections

Providing much needed assistance to employees’ who were blindsided by COVID-19 and who were incapable of making health care coverage elections with COVID-19 in mind, the IRS on May 12, 2020, provided temporary relief that allows employers, during 2020, to expand the permissible reasons for employees to make prospective mid-year election changes to their health care coverage, and contributions to health flexible spending accounts (FSA) and dependent care assistance programs (DCAP), beyond what is currently permitted under the law.

Additionally, in separate guidance, beginning in the 2021, the IRS increased the maximum health FSA year-end carryover amount from $500 to $550 relating to any unused health FSA balance remaining at the end of a plan year. Continue Reading

IRS Reverses Course on the application of Qualified Healthcare Expenses to the Employee Retention Tax Credit, and Clarifies Credit Eligibility in the event of a PPP Loan Repayment

Email concept with laptop and girl handsIn our blog post dated May 7, 2020, we noted that the IRS Question and Answers regarding the Employee Retention Tax Credit (the “ERTC” & the “Q&As”) stated that an employer cannot claim an ERTC for qualified health care expenses, unless it also pays the employee other wages during the relevant time period. We further noted that, in our view, this interpretation may not be consistent with congressional intent.

Within hours of publishing our post the IRS reversed course and revised Q&As 64 and 65. Q&As 64 and 65 now state that employers can claim the ERTC for qualified healthcare expenses, regardless of whether the employee is paid qualified wages. In general, we believe that the IRS’s new interpretation of how qualified healthcare expenses are treated for purposes of the ERTC is more consistent with congressional intent than its previous interpretation. Continue Reading

Employee Retention Tax Credits – Q&As

Question marks lit upNew guidance issued by the US Internal Revenue Service in the form of Q&As posted on its website, clarify the Employee Retention Tax Credit (ERTC) provisions contained in the CARES Act. The guidance is more restrictive than anticipated, and employers may face difficult decisions about claiming the tax credits. Our latest publication explores this issue in more detail.

 

IRS Publishes Frequently Asked Questions on Payroll Tax Deferral

CommentsThe Coronavirus Aid, Relief, and Economic Security (CARES) Act provides employers a number of economic relief programs, including deferral of employers’ share of quarterly social security tax deposits and forgivable Payroll Protection Program (PPP) loans.

The IRS recently released a set of frequently asked questions and answers regarding the CARES Act’s deferral of quarterly Social Security tax deposits. The Q&As confirm that no election is necessary for employers to begin deferring deposits, and further state Form 941 will be revised for the second calendar quarter of 2020 (i.e., April – June, 2020) with instructions for how to reflect deferred taxes that were otherwise due for the first quarter of 2020 (i.e., January – March, 2020). Continue Reading

Stop press – Furloughed employees and pension contributions – TPR fills in (some of) the gaps

Woman working on computer

No sooner had I published my blog this morning, on the Coronavirus Job Retention Scheme (CJRS) and the treatment of furloughed employees’ pension contributions – highlighting gaps in the HMRC guidance – the Pensions Regulator (TPR) published detailed guidance providing some much-needed clarity and reassurance for struggling employers.

The overriding message is that, whilst employers cannot avoid their legal obligations to contribute to furloughed employees’ pension schemes – these are underpinned by the terms of the employment contact, the rules of the pension arrangement and the automatic enrolment duties – TPR is sympathetic to the plight of struggling employers. TPR states that it “will take a proportionate and risk-based approach towards enforcement decisions, in light of these challenging times, with the aim of supporting both employers and savers”. Continue Reading

Furloughed Employees and Pension Contributions

Woman looking out window on phone

Last weekend HMRC published revisions to its guidance on the Coronavirus Job Retention Scheme (CJRS), providing further details on the extent to which the HMRC grant would cover the pay and benefits of furloughed employees.

If you are not already familiar with the key features of the CJRS (How many of us had to look up the term “furlough” a few weeks ago?) please refer to the excellent publication “Coronavirus Job Retention Scheme: UK Government Issues Further Guidance” issued by our Labor & Employment team.

The rules regarding the payment of pension contributions for a furloughed employee are still not entirely clear (and we are expecting further guidance, which may influence our interpretation of those rules) but the key elements are set out below. Continue Reading

COVID 19: Emerging Investment Risks for Pension Schemes

Businessman workingDaily policy initiatives by governments across the world who are desperate to avoid the worst ravages of an economic recession are fuelling a lot of the volatility in public markets with which investors are now sadly familiar. However, many pension funds have significant private market exposures through alternative investments. Those holdings are not immune to government intervention and pension funds should note the sometimes unexpected effect of policy changes.

The Pensions Regulator’s COVID 19 guidance on 27 March advised pension scheme trustees to “Review and manage specific risks which may now exist within their portfolios …eg concentrations of risk and/or exposures to deteriorating sectors/credits”.

This blog provides further detail on some emerging investment risks. Continue Reading

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