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DOL Issues Proposed Rule (Again) to Address Selecting Plan Investments and Exercising Shareholder Rights

On October 13, 2021, the DOL released a proposed rule which effectively provides that ERISA plan fiduciaries may consider climate change and other environmental, social, and governance (“ESG”) factors when they make investment decisions and when they exercise shareholder rights. Under the Trump administration, in late 2020, the DOL previously issued a final rule on “Financial Factors in Selecting Plan Investments” (generally requiring plan fiduciaries to select investments and investment courses of action based solely on consideration of “pecuniary factors”) and a related final rule on “Fiduciary Duties Regarding Proxy Voting and Shareholder Rights” (addressing obligations of plan fiduciaries under ERISA when voting proxies and exercising other shareholder rights in connection with plan investments in shares of stock) (collectively, the “Prior Rules”). Subsequently, President Biden issued executive orders which directed the DOL to consider a proposed rule to suspend, revise, or rescind the Prior Rules, and in March 2021, the… Continue Reading

New Provisions for Group Health Plan Administrative Services Agreements

As discussed in our prior blog post here, employer-sponsored, group health plans that impose nonquantitative treatment limitations (“NQTLs”) on mental health or substance use disorder benefits (“MH/SUD Benefits”) must make available to certain federal agencies, upon request, a “comparative analysis” report of the design and application of NQTLs under the plan. Plan sponsors should review their services agreements with third party administrators (“TPAs”) to determine whether the TPA will perform the analysis on behalf of the group health plan and provide the plan sponsor with a legally-compliant report covering the application of NQTLs for MH/SUD Benefits. While many TPAs currently provide some information to assist a plan sponsor with preparing the NQTL comparative analysis report, it is ultimately the plan sponsor’s responsibility to provide such report to the federal agencies if requested, and not the TPA’s obligation even though the TPA controls the data needed to prepare the report. Plan… Continue Reading

Federal Circuit Tells Patent Office to Limit Scope of Design Patents, Overturning Patent Office Precedent

On October 4, 2021, the Court of Appeals for the Federal Circuit told the Patent Office that the way it has been reviewing design patent applications is wrong, and that a design patent claim must be limited to the article of manufacture identified in the claim. In re: SurgiSil, L.L.P., et al, No. 2020-1940, 2021 WL 4515275 (Fed. Cir. Oct. 4, 2021). SurgiSil filed a design patent application claiming an “ornamental design for a lip implant as shown and described.” The Patent Office rejected the claim as anticipated, or not novel, in light of an art tool called a stump. Images of the claimed lip implant design (first image) and the art tool stump (second image) are shown below. In making the rejection, the Patent Office cited its own Manual of Patent Examining Procedure, MPEP § 1504.02, and a 1956 Court of Customs and Patent Appeals case, In re: Glavas, 230 F.2d… Continue Reading

Agencies Issue FAQs Clarifying Wellness Program and Other Health Plan Requirements Related to COVID-19 Vaccines

The DOL, Treasury Department, and HHS have jointly issued a set of FAQs that provide helpful clarifications regarding certain requirements under the CARES Act, the HIPAA nondiscrimination rules (the “Nondiscrimination Rules”), and the Affordable Care Act (the “ACA”) related to COVID-19 vaccines (“Vaccines”).  Wellness Programs under the Nondiscrimination Rules Among other items, the FAQs provide guidance under the Nondiscrimination Rules regarding an employer’s imposition of a premium discount under a wellness program for an individual’s receipt of a Vaccine. If the wellness program is itself, or is part of, a group health plan that is not otherwise exempt from the Nondiscrimination Rules, the FAQs confirm that a premium discount would constitute a “health-contingent, activity-only” wellness program that must, among other requirements, offer a “reasonable alternative standard” to qualify for the discount for individuals for whom it is unreasonably difficult due to a medical condition, or medically inadvisable, to receive the… Continue Reading

IRS Provides Further Clarification Regarding COBRA Deadline Extensions

Last year, the DOL and IRS issued joint guidance providing that certain plan related deadlines, including the 60-day deadline to elect COBRA continuation coverage and the 45-day deadline to make COBRA premium payments, would be suspended during the “COVID-19 outbreak period” (i.e., the time period from March 1, 2020 until 60 days after the end of the national emergency or other date announced by the government) for up to one year. The DOL released other guidance earlier this year clarifying that the one-year deadline suspension is applied on an individual basis (see our prior blog post on that guidance here). Recently, the IRS issued Notice 2021-58 (the “Notice”), which clarifies that the extended timeframes for an individual to (i) elect COBRA continuation coverage, and (ii) make initial and subsequent COBRA premium payments, generally run concurrently. The Notice provides that if an individual elects COBRA coverage after the 60-day election period… Continue Reading

Are Your Voluntary Benefits Programs Subject to ERISA?

An issue that many employers face is whether their so-called “voluntary benefits programs” should be considered ERISA plans. Voluntary benefits programs are characterized by employee-only paid premiums and limited employer involvement in a fully insured product. For the benefits provided under such a voluntary benefits insurance policy to be exempt from ERISA, the employer’s involvement in administering the policy must satisfy the requirements set out in the ERISA safe harbor regulation, as interpreted by the DOL and various courts. Generally, such a program will be exempt from ERISA if (i) there are no employer contributions toward coverage, (ii) participation in the program is completely voluntary, (iii) the employer does not endorse the program, and (iv) the employer receives no consideration for the program.  A recent case decided by a federal district court in Kentucky applied the above principles to determine whether a voluntary accidental death insurance policy was subject to… Continue Reading

Recent IRS Snapshot Regarding Deemed Distributions for Participant Loans Reminds Employers of Risk of Plan Loan Errors

The IRS recently released an Issue Snapshot (the “Snapshot”) focusing on participant loans from retirement plans and when certain compliance errors could trigger deemed distributions with respect to such loans. Specifically, the Snapshot lists the following requirements, which if not satisfied, will cause a participant loan to be treated as a deemed distribution: Enforceable agreement requirement, which generally requires a participant loan to be a legally enforceable agreement (which may include more than one document) and the terms of the agreement demonstrate compliance with the applicable requirements of the Code. Maximum loan amount limit requirement, which generally limits the maximum amount of a participant loan to the amount specified under the Code. The Snapshot also noted the CARES Act allowed modifications to the loan limit for certain loans to “qualified individuals.” Repayment period requirement, which generally requires the repayment period of a loan be limited to five years, unless the loan… Continue Reading

New Procedures to Establish Qualified Plan Distributions in the U.S. and Puerto Rico

The Puerto Rico Treasury Department recently issued Internal Revenue Circular Letter 21-20, which establishes procedures for a former resident of Puerto Rico to demonstrate that distributions received from a U.S. retirement plan qualified under the Code and whose trust was created in a U.S. state are not subject to tax under the Puerto Rico Internal Revenue Code of 2011, as amended (the “Puerto Rico Code”). In order to establish that distributions received from a U.S. retirement plan are not taxable under the Puerto Rico Code, an individual is required to submit IRS Form 8898 (Statement for Individuals Who Begin or End Bona Fide Residence in a U.S. Possession) to the employer who maintains the plan from which the distributions are made. If the individual does not submit a Form 8898, such individual must instead submit the following information to such employer to demonstrate the individual’s change of residence: An affidavit… Continue Reading

Filing a Form 5558 for Retroactively Adopted Plans Does Not Establish a 2020 Form 5500 Filing Requirement

In August 2021, the IRS issued guidance clarifying that certain plans retroactively adopted after the end of the plan year would not have to file a 2020 Form 5500 series return, which we previously discussed in our blog post here. Recently, the IRS further clarified that if a plan sponsor already submitted a Form 5558 (Application for Extension of Time to File Certain Employee Plan Returns) for a retroactively adopted plan, the submission of such Form 5558 would not require such plan to file a 2020 Form 5500. The IRS stated that the filing of the Form 5558 will not result in an IRS delinquency notice if no 2020 Form 5500 is ever filed for the plan specified in the Form 5558. The delinquency notices are based on when the Form 5500 is filed and not the filing of aForm 5558.   IRS newsletters are available here.

Federal Agencies Issue Proposed Revisions to Form 5500 Return/Report

The DOL, PBGC, and IRS (the “Agencies”) recently issued a Notice of Proposed Revision (the “Notice”) to update the Form 5500 Annual Return/Report filed for employee pension and welfare benefit plans. The DOL simultaneously issued a Notice of Proposed Rulemaking to implement the revisions proposed in the Notice. These proposed revisions primarily relate to certain statutory amendments to ERISA and the Code enacted as part of the SECURE Act and include other changes intended to improve Form 5500 reporting. Specifically, the Notice describes the following proposed revisions to the Form 5500 Annual Return/Report:  Consolidation of the Form 5500 reporting requirement for defined contribution retirement plan groups by (i) adding a new type of direct filing entity called a “defined contribution group” reporting arrangement, and (ii) establishing a new reporting schedule for such arrangement; Modifications to reflect pooled employer plans as a type of multiple employer pension plan (“MEP”) and implement… Continue Reading

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